By Teresa Ambord
Chances are, even greatly higher taxes won't tarnish the halo that comes with a ten-year, $254 million contract to play for the Angels. No matter where he plays, with a salary like that, Albert Pujols will pay the highest rate. In California this year, that means a state tax rate of 10.3 percent. Next year that may rise to 11.3 percent.
Pujols signed with the Angels after leaving his previous team, the St. Louis Cardinals. In Missouri, the top tax rate was only 6 percent, plus 1 percent additional in St. Louis. The lower tax was attractive but the salary wasn't, and compared to the offers he was getting, the Cardinals just couldn't hold him. Pujols was also courted by Miami where there's no state tax. But the Marlins - famous for fire sales - wouldn't give him the no-trade contract he wanted. So . . . what's a little extra tax anyway?
California, here I come?
To the naked eye, the difference between Missouri's 7 percent and California's 10.3 percent looks like 3 percent. But of course it's not that simple. The so-called Jock Tax applies, so Pujols will only pay California rates when he's playing or training within the state. The schedule dictates the actual tax Pujols and other players pay. Counting spring training, there are 220 "duty days" during the year when Pujols' location is key.
Overall, he'll pay an effective rate of 7.2 percent in 2012. If he'd stayed in Missouri, his effective rate would've been 5.2 percent. That 2 percent spread on Pujols' yearly salary works out to half a million dollars . . . extra.
Adding to the tax mix is the fact that the Angels train in Arizona where the top rate is 4.54 percent. As for the games themselves, when Pujols plays in his new home stadium of Anaheim, he pays less than when he plays just thirty miles away in Los Angeles against the Dodgers. On the other hand, when he plays the Seattle Mariners or the Texas Rangers, he pays no state tax at all.
With 2013 just around the corner, beleaguered California is looking at a proposed ballot referendum that will raise the top rate to 11.3 percent on individuals earning at least $1 million per year. On Pujols' an annual salary of $254 million, that's a mere quarter million additional tax. Currently that ballot referendum appears to be in trouble, so he may yet dodge that bullet, at least for 2013.
As for his federal income tax, his salary will be ordinary income, so another one-third will go to Uncle Sam. And, when he deducts the amount he pays in state tax, he could also trigger the alternative minimum tax.
Let's hope Pujols doesn't follow in the footsteps of so many wealthy sports and entertainment figures who revel in their wealth while neglecting their tax responsibilities. Chances are, before Pujols signed on the bottom line, his team of attorneys and accountants were already burning up their computers with tax strategies.
By the way, at the time Pujols signed with the Angels, he was subject to two tax liens filed by the St. Louis County Department of Revenue. Together they totaled about $730. Since he now easily makes that much before his eyes are open in the morning, it seems a safe bet that he's taken care of that pesky problem.