The Effect of State Taxes on Baseball Free Agents

Albert Pujols and Mark Buehrle were Major League Baseball free agents following the 2011 baseball season. Ultimately, Pujols signed a 10-year contract with the Los Angeles Angels of Anaheim, Calif., totaling $240 million (excluding incentive provisions), and Buehrle signed a four-year contract with the Miami Marlins of Florida totaling $54 million. Both contracts are backloaded. Pujols’s salary for the 2012 season was $12 million, and Buehrle’s was $6 million.

The negotiations that culminated in these contracts present an especially rich setting for examining jurisdictional tax considerations. Pujols’s decision came down to the St. Louis Cardinals or the Los Angeles Angels of Anaheim. Buehrle’s decision came down to the Chicago White Sox or the Miami Marlins. Those four jurisdictions feature vastly different state and local tax treatments, with financial ramifications in the hundreds of thousands of dollars each year. We demonstrate the tax implications of the different tax treatments in the contexts of the contracts of Pujols and Buehrle.