No, Manny Machado Can’t Avoid Paying California Tax by Being a Florida Resident

Earlier this week Manny Machado reportedly signed a baseball free agent contract to play with the San Diego Padres. He’s being paid $300 million over ten years…but that’s before taxes. An article on a website called “12up” says that Mr. Machado will be able to avoid California income tax through “creative posturing” as a Florida resident. The article is wrong.

Mr. Machado is one of many individuals impacted by the “Jock Tax.” This tax impacts entertainers, athletes, and professional poker players and requires income tax be paid based on the source of the income. Let’s assume Mr. Machado is a Florida resident; he would owe Florida income tax on his worldwide income. Since Florida has no state income tax, he owes nothing, right? Well, he owes nothing to Florida but the Padres play games in many states with a state income tax (including California); he will clearly owe California income tax on some of his income.

The Jock Tax is based on ‘duty days’ (not games played). Let’s assume out of the (approximately) 200 days in a baseball season 100 of those days are in California. He will owe tax on 100/200 of his salary (or half). He will avoid owing tax on all of his income to California, but to say he will completely avoid California taxation is dead wrong. While it’s true that California won’t gain $38 million a year, it’s probable that the state will collect over $20 million a year: Not only will Mr. Machado play half his games in San Diego, the Padres will play many games in Los Angeles and San Francisco–and those games will also cause Mr. Machado to owe California income tax.

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