Which Baseball Team Should Manny Machado and Bryce Harper Sign With – If They Care About Taxes?

Los Angeles Dodgers

• California top income tax rate: 13.3%
• Estimated annual state/local income tax bill: $4 million

After trading Yasiel Puig, Matt Kemp and Alex Wood to the Cincinnati Reds, it sure looks like the Dodgers will push hard to lure Harper to L.A. (They’re not wooing Machado.) But to sign him, the team might have to pay a little more to offset the big state income tax bill the slugger would face in California. At 13.3%, the Golden State has the highest marginal tax rate in the country. This includes the additional 1% levy on taxable income over $1 million. So, a player making $30 million per year for the Dodgers would pay around $3,949,359 per year in California income taxes. That’s the largest potential state tax bill Harper is likely to see.

California also has a relatively high sales tax rate (and superstar baseball players tend to buy a lot of stuff!). The state rate is 7.25%, but local governments can tack on additional taxes. In Los Angeles County, the base sales tax rate is 9.5% (and up to 10.25% in certain cities). This is the third-highest rate among the six cities Harper is rumored to be considering.

Harper will want to look at real property tax rates in the L.A. area, too. In Los Angeles County, the median property tax paid in 2017 was $4,044. That also ranks as the third-highest among the possible landing spots for Harper.

New York Yankees

• New York top income tax rate: 8.82% (plus city tax)
• Estimated annual state/local income tax bill: $3.8 million (living in NYC)

The Bronx Bombers have a long history of bringing in high-priced free agents. New York’s relatively high income tax rate (8.82%) might not be enough to keep Machado or Harper out of pinstripes, but if they live in New York City, they’ll have to pay an additional 3.876% income tax on top of the state tax. With a $30 million-per-year contract, that comes to roughly $3,807,160 if they live in the Big Apple ($2,644,584 living in most other areas of the state).

Sales taxes are not that high in the Big Apple—at least when compared with other cities on the list of contenders. The base state rate is only 4%, but cities can levy additional taxes. Plus, there’s a special 0.375% commuter tax in the New York City metropolitan area. For anyone living in New York City, the combined state, city and commuter sales tax rate is 8.875%. That rate is the third-lowest on this list.

However, property tax bills for anyone living in and around the Big Apple can be eye-popping. Those drawn to the bright lights of the big city should know that average real estate taxes in Manhattan, for example, were $8,769 in 2017. That’s by far the highest among the cities on our list—almost 75% higher than the runner-up (Chicago).

Washington Nationals

• Washington, D.C. top income tax rate: 8.95%
• Estimated annual state/local income tax bill: $2.7 million

Bryce Harper spent the first seven years of his career in a Washington Nationals uniform; will he want to stay in D.C.? He’s still talking with the Nats (who aren’t chasing Machado), so it’s certainly a possibility. If Harper inks a new deal with the team, the right-fielder could be stuck with a fairly high tax bill, though. The top income tax rate in the nation’s capital is 8.95%. On a $30 million annual salary, that comes out to an estimated $2,678,377 in D.C. taxes. Comparatively, not bad, but he can do better when it comes to finding a tax-friendly landing spot.

• On the plus side, the sales tax rate in D.C. is relatively low, at 6%. That’s the lowest rate of the cities with a team on Harper’s rumored short list, which could make D.C. look a little more tax-friendly in the slugger’s eye.

Property taxes in D.C. are in the right ballpark, too. The median property tax in the city for 2017 was $3,238. Looking at the list of Harper hopefuls, only Philadelphia and St. Louis had a lower average

Philadelphia Phillies

• Pennsylvania income tax rate: 3.07% (plus city tax)
• Estimated annual state/local income tax bill: $2.1 million

Since the Phillies have some extra cash and they’re ready to spend, there’s a decent chance that either Machado or Harper will end up in the City of Brotherly Love. If so, they’ll like Pennsylvania’s flat 3.07% income tax rate. But they might be surprised to learn that Philly’s separate earnings tax rate is even higher than the state rate: 3.8809% for city residents and 3.4567% for non-residents. The tax applies to anyone who lives or works in the city. So, assuming one of these players signs with the Phillies and lives in the city, his $30 million salary will result in a combined state/city tax hit of about $2,085,270 (less $127,260 if he lives outside the city).

• The sales tax rates in Philly aren’t too bad. The state rate is 6%, plus there’s a 2% additional tax in Philadelphia. The combined state/local rate of 8% is the second-lowest of the six cities with teams chasing Machado and Harper.

The property tax rate in Philadelphia is also comparatively low. In 2017, the average real estate tax paid in the city was only $1,586—second-lowest of all the cities on Machado’s or Harper’s wish list.

St. Louis Cardinals

• Missouri top income tax rate: 5.9% (plus city tax)
• Estimated annual state/local income tax bill: $2 million

Some insiders still think the St. Louis Cardinals may go after Harper (but not Machado). If so, the right-fielder is going to like the state income tax rate. That’s because Missouri’s top tax rate for the 2018 tax year is only 5.9% (and it’s set to drop to 5.4% for 2019). On a $30 million annual salary, that comes out to an estimated $1,768,114 in state taxes. However, for players living or working in St. Louis, there’s also a 1% earnings tax. For a city resident, that would add $300,000 in local income taxes—which pushes the combined state and local tax to about $2,068,114.

• Sales taxes in St. Louis are high, though. The state’s base rate is 4.225%, but it can jump considerably when you add on local rates. In the city, the combined sales tax rates range from 9.679% to 11.679%. That’s the highest of any of the six cities with teams believed to be interested in Harper’s services.

Property taxes, however, are much more reasonable. The median property tax in St. Louis for 2017 was only $1,483. That’s the lowest on our list.

Chicago Cubs or White Sox

• Illinois income tax rate: 4.95%
• Estimated annual state/local income tax bill: $1.5 million
• If Machado and Harper are looking for the lowest overall state tax burden, they should sign with either the Cubs or White Sox.

The White Sox are supposedly interested in both Machado and Harper, and the Cubs reportedly have Harper on their radar, too. If either player ends up in the Windy City, he’ll save big on state taxes. Income is taxed in Illinois at a flat rate of only 4.95%, and there are no local income taxes to worry about. With a $30 million annual salary, state income taxes would come to roughly $1,484,780 per year. That’s the lowest total for any team linked to the two free agents.

Chicago’s sales tax rates are on the high end, but lower than in St. Louis. The state rate is 6.25%. However, the actual rates range from 9% to 11% in Cook County, thanks to local add-ons.

Property tax rates are steep, too. The average real estate tax paid in Cook County was $5,065 in 2017. Only New York City had a higher total among the cities Machado and Harper are considering.

The high sales and property taxes in Chicago don’t overshadow the state’s favorable income tax rate.