Fundamental Truth

Sports Stars only Work Part Time yet they Earn almost as Much as CEOs

It’s open season on rich CEOs.  From the Occupy Wall Street movement to the Obama Campaign attacks on Republican candidate Mitt Romney.  CEOs are too rich.  They don’t pay enough in taxes.  And they hate children.  Because they oppose higher tax rates on their income.  Which can only mean one thing.  They hate children.  At least if you listen to those on the Left.

So how well paid are they?  Well, they are paid well.  But not as well as some well-paid rich people.  Especially those typically associated with the Left.  High earning sports stars.  High earning Hollywood elites.  High earning superstars in music.  And high earning authors.  There are some conservatives in these fields.  But it’s hard to know who they are.  Because they tend to hide their politics to avoid undue attention on themselves.  Whereas liberals can be as outspoken and as critical of conservatives as they wish and never bring any undue scrutiny on their incredible high earnings.  Why?  It is the great unspoken rule in being filthy rich.  If you are an outspoken liberal you can be as filthy rich as you want and you will never hear an unkind word about your obscene wealth.  So let’s look at some filthy rich people.  Let’s look at the top 10 annual earners in the following sectors (see links above for source information):

Of the sectors shown CEOs are only richer than sports stars.  But not by much.  Which says a lot about the earnings of sports stars.  For sports are seasonal.  They have off-seasons.  And yet they make almost as much as CEOs.  Who work year round.  But other than the part-time sports stars the filthy rich CEOs are less filthy rich than the Hollywood elites, superstars in music and authors.

No One says that Musicians Earn too Much even though they Earn More than CEOs who Earn too Much

The median household income at the end of 2011 was $ 51,413.  Some may say this is rich.  If you’re making minimum wage perhaps it is rich.  But it’s a long way from those noted above.  Interestingly many of these people will say CEOs earn too much.  Some may even say these sports megastars earn too much.  But not many.  Few if any will criticize Hollywood elites, superstars in music and authors.  Even though they live a far better life than they could ever imagine.  Why?  Because these rich people say they care for the little guy.  And support Democrat candidates for office.  Which, of course, takes the spotlight off of their obscene wealth.  And they can insulate their lives from the policies of Democrats.  Which tend to be anti-business.  Including high taxes.  A complicated tax code.  And high regulatory compliance costs.  So CEOs tend to support Republican candidates.  Who tend to fight the anti-business policies of Democrats.  Because they hurt the businesses they’re responsible for.  Which, of course, makes them look greedy.  And like they hate children.

So how do these filthy rich people compare to the median household income?  Like this:

The sports megastars are the pauper of the group.  They only earn 780 times the median household income.  Musicians are the filthiest of the rich coming in at 1,701 times the median household income.  Meaning the average income of the top ten superstars in music equal the median income of 1,701 households added together.  Another 687 households more than the average income of the top ten CEOs.  Yet people say CEOs earn too much.  But no one says that musicians earn too much.  Even though they earn more than those who earn too much.

If CEOs are Overpaid then so Must Everyone who is Paid More than Them

People tend to pick on CEOs.  Because they are highly compensated.  Not as highly as musicians, the Hollywood elite or authors.  But highly.  They get those high compensations for a reason, though.  A few bad decisions at the top can ruin a successful business.  Whereas the CEO who consistently makes good decisions will make a business grow.  Creating wealth.  And jobs.  At the CEO’s business.  And all the businesses that feed into it.  Thanks to the stages of production.  So a good CEO can create a lot of economic activity.  Wealth.  And jobs.  Not to mention a whole lot of tax revenue.  Which fund all those Democrat programs.  Including the ones for children.

The other filthy rich create jobs, too.  And wealth.  But nowhere near what a good CEO can create.  For few of them are singularly responsible for building their industries.  Unlike a John D. Rockefeller.  An Andrew Carnegie.  A George Westinghouse.  Or a Steve Jobs.  These people changed the world.  And put hundreds of millions of people to work through the years.  Compared to the limited economic activity a pop star creates.  A movie star.  An author.  Or an athlete.

So a CEO creates more wealth and jobs for others than most filthy rich people.  And they create more tax revenue at all levels of government than most filthy rich people.  So one would think they would deserve higher compensation for all the good they do.  But no.  At least according to those on the Left.  So what would be fair?  Call them musicians?  Movie stars?  Authors?  If so then we could even pay them more.  For no one complains about their high compensation.  Or should we cut their pay?  As well as musicians, movie stars and authors?  And sports stars?  Pay them all less.  For if CEOs are overpaid then so must everyone who is paid more than them.  Of course that probably wouldn’t go over well with the athletes, the Hollywood elite, the musicians and the authors.  So perhaps to settle the CEO pay issue once and for all we should peg it to a weighted average of the pay of athletes, the Hollywood Elite, musicians and authors.  So the amount of compensation just doesn’t matter anymore.  Because they will be as filthy rich as the people the Left has no problem with being filthy rich.

www.PITHOCRATES.com

Week in Review

Don’t think high taxes influences behavior?  Of course, no one cares about the evil 1%.  Those greedy Wall Street types that don’t pay their fair share of taxes.  But you know who else is in that greedy 1%?  Your favorite athletes.  And guess what?  They want to hold on to their earnings just like those greedy Wall Street types (see Professional Athletes’ Big-League Tax Bills by Jay MacDonald posted 3/15/2012 on Yahoo! Finance).

Behind every sports star who’s hauling down the big bucks is a keen-eyed certified public accountant quick-stepping through a maze of state and local income taxes imposed on nonresident athletes, commonly known as the “jock tax.”

Professional sports players get taxed by pretty much every city and state in which they play, says Ryan Losi, CPA and executive vice president of Piascik & Associates, a Glen Allen, Va., accounting firm that represents more than 70 professional athletes.

“NFL players typically file in 10 to 12 jurisdictions. NBA is somewhere between 16 and 20. MLB is somewhere between 20 and 26, and the NHL is between 14 and 16,” says Losi.

Professional sports players are great big cash piñatas to these city and states that chronically over spend.  They all want a piece of these guys.  To make sure they pay their ‘fair share’ of taxes.  While they can before some career-ending injury puts an end to this gravy train.  But because these players could lose millions in future career earnings because of a career-ending injury, they want to keep their money.  For they may never be able to get another job.  Sure, some may move into the front office.  Some may move on to coaching.  But few will earn the kind of money they did during their short careers.  So they want to keep as much as they earn.  To take care of their wife and kids.  And have enough for their retirements.  Which can be rather long for these worn out and injured bodies.  So they just don’t sit by passively while every taxing authority is shaking them down for everything they’re worth.

The lion’s share of most players’ income, their salary, is taxed in the city and state where the team is based. But income from other sources, including endorsements, personal appearances, dividends and interest income, is taxed in their state of residence.

This is the reason New York Giants quarterback and Super Bowl MVP Eli Manning lives in Hoboken, N.J., instead of in the Big Apple. It’s simple arithmetic, says Raiola.

“If he were a resident of New York, he’d pay 8.97 percent New York state tax and another 3.78 percent New York City tax on top of that, not only on his wage income but also his endorsements and investment interest,” he says. “In New Jersey, he only pays 8.97 percent…”

Taxes — or the lack of them — may also have had something to do with NBA all-star and 2010 free agent LeBron James’ choice to play for the Miami Heat instead of the New York Knicks. Losi points to Florida’s lack of a state income tax.

“That may have been one of the factors that led LeBron to choose Florida versus New York,” says Losi. “Ten percent of his first contract was going to be the difference. For him, it was an extra 5 (percent to) 9 percent difference in tax. That’s real money.”

New York City may be the greatest city in the world but the rich pay an enormous amount of taxes to live there.  So many chose not to.  In fact, a lot of athletes chose where they live and raise their families based on their total tax burden.

Professional golfers, tennis players and other athletes who compete on the world stage often leave a third or more of their earnings in the local coffers.

“Whenever they play in foreign countries, they have to pay taxes in that jurisdiction, and the tax liability is much bigger than the 5 (percent) to 10 percent state tax. It’s usually in the 30 (percent) to 40 percent bracket,” says Losi. “Usually it’s withheld in their prize money, and they can file a nonresident return if they think they might have a refund coming.”

Because the United States is one of the few countries that taxes all personal income regardless of source, some pro sports stars who compete internationally actually have a financial disincentive to make their home in America.

“If they’re (not U.S. citizens or green card holders) and they’re not planning to stay here more than 183 days out of the year, from a tax perspective it absolutely makes sense to not live in the U.S.,” says Losi. “All the foreign golfers who come here to play, if they want all of their foreign prize money and endorsement money to be taxed, all they have to do is hang out here for 183 days.”

Being an athlete competing at the level that makes them millionaires is not an easy life.  While others look forward to weekends, holidays and vacations to kick back and relax and recharge their batteries with copious amounts of alcohol and enormous quantities of fattening foods these athletes don’t.  They often work on weekends and holidays.  And when they’re not working they’re practicing.  Where their practice is often more intense than their competition.  This is their life.  This is how they become elite athletes.  And their reward?  To be whacked open like a cash piñatas by the taxing authorities so the politicians they serve can take their money and spend it to buy votes for the next election.  And forcing them to choose where to live based on who will penalized them the least for being really good at something.

This is not a meritocracy.  Where we reward people for achievement.  This is out of control government spending to maintain a privileged class.  Politicians.  And government workers.  Who live and feed off of taxes.  To fund their class warfare that makes these privileged few secure in their class.

www.PITHOCRATES.com