The Major League Tax Implications of Bryce Harper’s $330MM Phillies Move
Last week, free-agent right fielder Bryce Harper finalized his move to Philadelphia, Pennsylvania to play for the Phillies for a whopping $330 million thirteen-year commitment. When choosing a team, MLB players have a lot to consider from location to loyalty to long term payoff. Something most players don’t initially consider is that different states have very different state taxes and how their salaries are structured may have major league tax implications.
Besides the Phillies, the other big contenders taking a swing at landing Harper were the Dodgers, Padres, and Giants in California. Being that the California state tax rate on personal income taxes is one of the country’s highest at 13.3% vs. Pennsylvania’s low 3.07%, it’s not surprising the Phillies might have had a slight advantage. When making offers, teams and consultants must use numbers that bring this into consideration. California’s players pay millions more in taxes each year, meaning many of the teams must make higher initial offers or face rejection.
With a smart management team and the help of tax consultants, players can assess the pros and cons of competing offers. His former team, the Washington, D.C Nationals, had allegedly offered him $300 million for ten years, but even with a 0% state tax rate Harper declined the bid. Consider Harper’s $20 million signing bonus, which is usually exempt from state taxes. This isn’t the case In Pennsylvania, where signing bonuses are recognized as allocable income, meaning a portion of his signing bonus is taxable, to the tune of $603,109. In his 13 years as a Phil, Harper will pay over $9 million to the state and city, not a bad deal as he will still end up with around $320 million.
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