Tuesday, January 22, 2013

Mega-Rich Professional Golfer Complains That Paying Higher Taxes ‘Doesn’t Work For Me Right Now’

As governments at both the federal and local levels attempt to cut down budget deficits, taxes are going up on wealthy Americans like superstar professional golfer Phil Mickelson. The federal tax rate returned to its Clinton-era levels for income above $450,000 at the beginning of 2013, and voters in California, where Mickelson lives, approved a three percentage point tax increase on incomes above $1 million in November.

Such increases have helped — California is projecting a budget surplus for the first time since 2007. But for Mickelson, who made more than $40 million in tournament winnings and endorsements in 2012, the higher tax rates are a reason for “drastic changes,” like potentially moving out of his home state, he told CBS Sports:

I’m not sure what exactly, you know, I’m going to do yet. I’ll probably talk about it more in depth next week. I’m not going to jump the gun, but there are going to be some. There are going to be some drastic changes for me because I happen to be in that zone that has been targeted both federally and by the state and, you know, it doesn’t work for me right now. So I’m going to have to make some changes. [...]

I’ll probably go into it more next year or next week. But if you add up, if you add up all the federal and you look at the disability and the unemployment and the Social Security and the state, my tax rate’s 62, 63 percent. So I’ve got to make some decisions on what I’m going to do.

If Mickelson is indeed paying 62 to 63 percent of his income in taxes, he probably needs new financial advisers. When state, local, and federal taxes are combined, California does have the nation’s highest marginal tax rate, but it’s likely Mickelson’s marginal tax rate (the rate he pays on his last dollar) doesn’t top 52 percent once deductions for state and local taxes are included. And if he is investing, contributing to charity, or planning for retirement, there are an assortment of ways for him to legally lower his tax rate.

But even if he does pay a higher tax rate, he doesn’t have it all that bad. The vast majority of his income came from sponsorships, meaning companies paid him $43 million to wear their logos, play golf with their equipment, and film commercials. He made another $4.8 million playing in 22 golf tournaments, bringing his career total to more than $66 million and his net worth north of $150 million. He is the world’s seventh highest-paid athlete.

Meanwhile, the amount of taxes paid by the wealthy has plummeted over the last two decades, even as states like California face budget deficits that force them to cut spending on education, public safety, and poverty and children’s programs. And while he complains about his burdensome tax rate, the average California household would have to spend the next 775 years working to make what he made last year alone.

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