Started in 2009, Tennessee’s jock tax was unique for a few reasons. It was a flat tax: $2,500 per game in Tennessee for all NHL and NBA players, with a maximum tax bill of $7,500 per year.
While a $2,500 tax bill is not a hardship for players like Kobe Bryant, with his $23.5 million salary, for players making the league minimum – $507,336 this season, or $2,537 per day according to a 200-day work year – a trip to Tennessee to play the Memphis Grizzlies meant basically working for free.
Another way Tennessee’s tax was unusual: the money didn’t go to government, it went back to the Memphis Grizzlies and Nashville Predators. The clubs defended the tax – which generated $1.5 million to $2 million per year per club – as important money they used to lure big musical acts like Paul McCartney and Elton John for events that generated tax revenue for their cities. (Professional football was not included in Tennessee’s jock tax, so it did not apply to the Tennessee Titans or their opponents.)
The NHL players’ settlement, first reported by SportsBusiness Daily, will result in the Tennessee Department of Revenue cutting checks of between $1,250 and $11,250 for more than 800 current and former players hit with the tax between 2009 and 2012. Each player will get back about half of what he paid Tennessee.
A similar lawsuit filed by about 140 current and former NBA players is pending, according to Stephen Kidder, a tax lawyer representing the players. Last summer, the Tennessee Legislature repealed the tax, officially called the “Professional Privilege Tax on Professional Athletes.”
Jock taxes are understandably appealing to lawmakers looking to raise revenue. Visiting professional athletes are well-paid out-of-state residents whose tax gripes are unlikely to generate public support or voter outrage. More than a dozen states across the country have enacted them, according to an April New Yorker story, including California, Colorado, Indiana, Louisiana, Massachusetts and Pennsylvania, as well as cities including Cleveland, Cincinnati, Kansas City, Pittsburgh and St. Louis.
Players and union representatives have criticized the taxes, however, as unfairly singling them out because professional sports leagues, unlike other lucrative industries that require travel, have easy-to-access, publicly available schedules that help government taxing authorities keep track of who plays where. In California, the state’s Franchise Tax Board has a specific department tasked with ensuring “nonresident professional athletes” pay their taxes for games played in that state.
The settlement in Tennessee comes just months after the Ohio Supreme Court struck down the city of Cleveland’s jock tax as unconstitutional. That ruling, issued in April, came after lawsuits filed by former NFL players Jeff Saturday and Hunter Hillenmeyer. Cleveland is challenging the ruling, which found the city unconstitutionally taxed athletes for work they performed when not actually in Cleveland.
Cleveland’s jock tax, for football players, taxed their entire week of work leading up to a game against the Browns. Most NFL teams, at most, spend the day or two before a road game in that city. In 2008, Saturday, a former center for the Indianapolis Colts, was injured and stayed home when when the Colts played the Browns. Cleveland government still took $3,594 in taxes out of Saturday’s $178,878 check for that week, according to court documents.
“Professional athletes have come to realize that this (jock taxes) is a part of the landscape for them,”said Kidder, who has served as tax counsel to all professional athlete players associations. “When they object, it’s when they’re being treated completely differently from other taxpayers. That’s what was happening in Cleveland, that’s what was happening in Tennessee.”