D.C. Eyes ‘Jock tax’ On Nonresident Pro Athletes
||Washington Times (DC)
||Wednesday, April 20, 2011
||Tom Howell Jr.
Alex Ovechkin’s tax preparations could soon be a hat trick of federal, Virginia and new D.C. “jock” taxes for his dazzling performances at the Verizon Center.
The hockey phenom undoubtedly pays athlete-specific taxes to numerous states where he plays road games with the Washington Capitals, but members of the D.C. Council want to level the playing field.
Council member Jack Evans, Ward 2 Democrat, introduced a bill Tuesday to collect taxes from professional athletes who earn money in the District, but do not live in the city - a common yet controversial practice across the country. Mr. Evans said the District could gain as much as $5 million a year from the levy.
But, like many measures in the District, it’ll need an assist on Capitol Hill.
The D.C. Home Rule Actof 1973 prohibits the city from imposing a tax on nonresidents. Mr. Evans says there is a quick fix: By adopting his nonbinding “sense of the council” resolution, city lawmakers could ask D.C. Delegate Eleanor Holmes Norton to introduce a bill that amends the nonresident section of the tax code to say “except for professional athletes.”
Most states tax pro athletes for games at their sporting venues, because they are technically working and earning their keep. The athletes are easy targets for the revenue generator because they are high-earners, everyone knows their salaries and their activities are easy to track.
Most sources trace the jock tax back to a tit-for-tat between California and Illinois in 1991, when the Golden State decided to tax Michael Jordan and company after the Chicago Bulls‘ victory over the Los Angeles Lakers in the NBA Finals.
“Whether it had that kind of animosity, I don’t know, but there was a more-than-coincidental timing between the two,” said Scott A. Hodge, president of the Tax Foundation, a nonprofit tax research group based in Washington.
Illinois instituted the tax as well, and the practice snowballed from there. California has reported more than $100 million in annual revenue from the tax, and a “more modest proposal” in Tennessee projects $1.1 million, according to the bill sponsored by Mr. Evans and Harry Thomas Jr., Ward 5 Democrat.
In opposition, Mr. Hodge said the jock tax singles out a profession, forces people to pay taxes in areas where they have no congressional representation and can trickle down to lower-level athletes. Proponents of the tax, he said, “do not realize this extends to people on these clubs who aren’t making the multimillion-dollar salaries.”
The proposal in the District would also extend to athletes who, like Ovechkin, play for Washington sports franchises but live outside the city’s limits.
A spokesman for Ted Leonsis, owner of the Capitals and the Washington Wizards NBA basketball franchise, declined to comment on the D.C. proposal.
More than half of the Wizards players lived in the District this season, mainly because they were young and single or acquired through in-season trades or signings and needed temporary housing, a team representative said.
Players who live in the District would be exempt from the proposed D.C. jock tax. Nonresident athletes face numerous tax filings already, but “they do have people who do it for them,” Mr. Evans said.
“It’s adding one more to the 26 they’re already doing,” he said.
Mr. Hodge countered that the stack of tax returns for each state can be “a nightmare,” especially for athletes who cannot afford professional help, and there is precedent for home states shifting their tax-credit rules.
Mr. Evans is confident the athletes will be reimbursed by their home states to avoid double taxation, a practice akin to a commuter tax.
The council member, who serves as chairman of the Committee on Finance and Revenue, said critics of the proposal will probably see the athlete tax as a “camel’s nose under the tent,” or bridge to a broader tax that takes on lawyers, lobbyists or other professionals who shuttle into the District from high-priced homes in neighboring states.
Mr. Hodge shares their fears, given the number of professionals who cross into the District each day.
“This law could easily be extended to them,” he said.
Mr. Evans promised that his proposal will be limited to pro athletes, yet acknowledged the bill will require “the acquiescence” of representatives from Maryland and Virginia.
“We’ve gotten the raw end on so many other things,” Mr. Evans said. “This is a bone that someone can throw us, to be honest.”