A Heavenly Deal?
Right now, if you are a St. Louis Cardinals baseball fan, you are probably in a state of shock, anger, or melancholic resignation. El Hombre has decided to leave Cardinal Nation behind for the riches of the Golden Coast. Yes, Albert will sign with the Angels. The deal reportedly is above the Cardinals’ latest offer (allegedly 10 years and up to $220 million) and from every indication, an unforgettable era in Saint Louis baseball is over.
Just how rich does this make Albert? Well, one local sportscaster estimated today that if Albert bats five times each game next year for the Angels, he will be raking in a cool $30,000 each time he steps into the batter’s box. Not bad, huh?
But if it makes you feel any better, it may not be all win-win for our legendary No. 5. Consider income taxes. Missouri’s top personal income tax rate is 6 percent, which kicks in at $9,000 (he would have also paid an additional 1 percent earnings tax [click on policy study and scroll down to page 46] in Saint Louis). In comparison, California’s top rate is 10.3 percent for incomes above $1 million (of course it might not STAY that way). I am not the only one to notice the possible influence that income tax rates could have had on Albert’s decision (this was regarding the offer from the Miami Marlins).
However, at the margins, how much of a difference would these tax rates have made on Albert’s decision? First, consider that Albert will only have to pay this 10.3 percent top rate for games played in California. He will play a good chunk of his games in states with NO personal income taxes (Washington and Texas). Now, I am not an economist and there are other factors involved here, but just doing some back-of-the-envelope calculations for the home games, I found that Albert would pay slightly more than $4.6 million more in taxes over the life of his contract in Anaheim than Saint Louis. Considering the supposed $30 million to $40 million difference in value of the contracts, would the tax factor make that much of a difference? It is certainly possible (even though Albert did decide to leave). If the Angels had offered him the same amount as the Cardinals, the tax difference would cost Albert approximately $3.7 million.
Who is to say if the difference would matter, especially for a single individual who has to weigh many factors in his decision to move. However, if you are a business, that tax difference could influence a decision between paying taxes or hiring a couple of new employees. Just some things to ponder while Albert packs his bags.