Show Me the Money (After Taxes): The Hidden Factor in Professional Sports Free Agency
- Matthew Gillaspie
- Apr 28
- 3 min read
Players and professional sports leagues like the NFL, MLB, and NBA generate tens of
millions of dollars during periods known as free agency, where players leave one team and join
another. This got me thinking: do state taxes impact where players sign, and does that
marginally impact a team's ability to win games?
The reason I first started thinking about this was a quote from Seattle Seahawks General
Manager John Schneider in response to a new millionaire tax proposed in Washington State. He
said,
"It's going to affect us. … It's going to affect all the sports teams, for sure.
" That quote sent
me down a rabbit hole.
In my research I found that there are currently nine states with no income tax, while
California sits at the top with a 13.3% rate. States like New York, New Jersey, and Minnesota
also carry very high state income taxes. In an article published by the San Diego Union Tribune,
the authors go into depth about how a couple of percentage points between one team and
another on a multimillion dollar contract really adds up, and the difference becomes even more
dramatic when comparing no income tax states against the highest taxed ones.
A real world example helps put this in perspective. In 2022, wide receiver Tyreek Hill
signed with the Miami Dolphins instead of the New York Jets. At the time, Tyreek signed a four
year $120 million deal, making him the highest paid wide receiver in the league. While they are
called the New York Jets, the team plays and practices in New Jersey, which due to what is
known as the "jock tax" means that is where players are taxed. New Jersey's income tax sits at
10.75%, meaning that if Tyreek had been offered the exact same contract by the Jets, he would
have taken home roughly $13 million less over the course of that four year deal. Taxes are more
complicated than that simple math, but it gives you a clear idea of the money left on the table
and the advantage that places like Florida and Texas have in attracting players.
I also came across an academic paper that attempted to calculate the actual difference
in wins based on a state's income tax rate. The researcher found that for every one percentincrease in state income tax, a team's win percentage dropped by .77 to .86 points. To further
validate this, the same researcher tested collegiate programs, which at the time could not pay
their athletes, and found zero correlation between state income tax percentage and team win
percentage. That contrast is important because it strongly supports the argument that state
income tax directly impacts a professional team's ability to win through its effect on free agency.
Now, state income tax is not the whole picture. Sometimes players simply chase the the
team with the best chase to win it all. Other times it is about moving to a warm weather city, or
playing for a coach who will help them reach their potential. However, especially in leagues with
salary caps where every dollar matters, teams in no income tax states do have a meaningful
advantage. A team might be able to offer a player a slightly lower gross salary while still
delivering higher take home pay than a competitor in a high tax state. That gap in spending can
then be redirected toward signing another player who pushes the team closer to a
championship. So in the end, I do believe state taxes matter in free agency. But like most things
in sports, it is not the whole picture. It is simply one slice of a very big pie.
References
Hembre, E. (2019). State income taxes and team performance: Do teams bear the burden?
University of Illinois at Chicago.
Roth, M. (2015, April 20). How taxes affect free agency in pro sports. The San Diego Union
Tribune.
ts/
Tax Foundation. (2025). 2025 state individual income tax rates and brackets.
Wong, K. (2022, October 3). Tyreek Hill explains why he chose the Dolphins over the NY Jets.
Condotta, B. (2025). Seahawks GM John Schneider says WA high earners tax will affect us.
The Seattle Times.
earners-tax-will-affect-us/
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