Today, Washington, DC will see its first postseason baseball game since 1933. One of the benefits a state (and sometimes city) gains when one of its teams makes the playoffs is unplanned tax revenue from visiting and home players. But not Washington.
Washington, DC has an income tax rate of 8.95%, one of the highest in the country. But unlike every other state with an income tax, Washington does not impose a jock tax. Why would the District, strapped for cash like nearly every other state (okay, DC is not technically a state), not want to impose a tax on visiting and home athletes who use taxpayer-funded facilities? They do, but there is one problem. The District’s annual budget must be approved by Congress. Thus, anytime the Mayor or City Council wishes to impose or cut taxes, it must seek congressional approval.
The federal government provides approximately $3 billion in funds to DC on an annual basis, so if DC had additional funding from the athletes who visit the District, it would become slightly less reliant on federal funds. It would seem that imposing a jock tax in DC could help curb federal spending. It is a win-win for Congress and DC, right? Wrong.
Nearly every year the DC mayor places a jock tax in the District’s annual budget and each time Congress has rejected the measure. Why would Congress disagree with a measure that would decrease federal spending while making DC more self-reliant? Because of the credit for taxes paid. When filing a multi-state tax return, taxpayers are entitled to a credit for taxes paid to other jurisdictions. The credit would directly reduce revenues in the states in which athletes live—and which Congresspeople represent.
The highest-paid player on the Nationals’ roster to not spend time on the disabled list this season is Edwin Jackson (ironically, today’s starting pitcher) at $10,957,715. Assuming the Nationals are eliminated from the playoffs on Thursday—I am a Nationals fan, so I hope they are not—Mr. Jackson will have worked 236 days for the team this year, 85 of which were spent in DC. Without regard to deductions, if DC imposed a jock tax, Mr. Jackson’s liability to the District would be $350,449 on $3,946,635 of income.
If Mr. Jackson was a resident of a high-tax state, such as California, a DC jock tax would cost the state $350,449 with no net effect to Mr. Jackson. If he was a resident of a low-tax state like Indiana, it would cost the state about $134,000 and Mr. Jackson would foot the remaining $216,449.
This illustration exemplifies why Congress will never approve a jock tax for the District. In doing so, Congresspeople would be forced to explain to their constituents why it is a good idea to shift money from their state into DC and in the athlete’s case, why the Congressperson voted to increase his tax when the money is not even going to his home state. Not a good recipe for re-election.