Apr
26

Tough Taxes

The Friday File: Every percentage point increase in state income taxes faced by free-agent baseball players raises their salary by $22,500/year. By contrast, the same tax increase reduces slightly the average skill level of free-agent basketball player signings. It’s because baseball teams have no real salary cap, while basketball teams are very constrained. Thus, basketball teams in low-tax states effectively have a higher salary cap and sign better players.

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