The Boston Red Sox are the most successful Major League Baseball team in the 21st century. But tax policies passed by members of both major political parties threaten that record. The Red Sox, who won the World Series in 2004, 2007, 2013, and 2018, can thank this legislation if they have difficulty signing quality free agents in future years: the Tax Cuts and Jobs Act of 2017 and the Fair Share Amendment.
The two acts are nothing alike. A Republican-controlled Congress passed the former in 2017, and then-president Donald Trump signed it into law. Critics say it disproportionately benefitted the wealthy as most cuts went to corporations. Meanwhile, the Fair Share Amendment had the opposite issue. The law’s critics argued that it soaked the rich and that people will move states due to its passage.
The Fair Share Amendment is a law Bay Staters passed in November 2022; 52 percent supported the proposal, while 48 percent opposed it. Before it passed, Massachusetts had a flat five percent state income tax rate. Citizens got that rate thanks to a 2000 ballot question; they voted to reduce the state’s income tax from 5.9 percent to five percent. Cutting the rate down to five percent took nearly 20 years. The legislature intervened to ensure revenue didn’t dip too quickly, so the rate dropped by 0.05 points each year the state had a balanced budget or a surplus. However, the state didn’t have a flat five percent rate for long. The Fair Share Amendment created a second tax bracket. Now, people must pay a nine percent rate on income exceeding $1 million annually. The nine percent rate went into effect as of the start of 2023. Notice the tax increase was immediate, unlike the modest tax cut from 2000. So what does one policy have to do with the other? When it comes to Red Sox baseball, a lot.
The Tax Cuts and Jobs Act was blasted by blue state politicians—Republicans and Democrats—because it capped the state and local tax deduction (SALT) at $10,000 annually. Before it became law, an unlimited deduction existed. It benefitted higher-income earners who owned expensive homes and paid large property tax bills. They could show less income to the federal government and pay a lower rate.
In the aftermath of the bill’s passage, conservative media outlets correctly pointed out that it would give an advantage to low-tax states in professional sports. States like Florida, Texas, Tennessee, and others that have professional sports teams but no income tax became more appealing places to play than states like New York and California, where the top state income tax rates exceed 10 percent. Massachusetts had a flat 5.1 percent rate in 2017, so the Tax Cuts and Jobs Act wasn’t a huge problem for its teams, including the Red Sox. While Massachusetts has a higher tax burden than most states, the problem mostly is that it has more types of taxes than other states. Adding a nine percent millionaire tax rate makes it a more expensive place for the ultrawealthy to work.
States and countries shouldn’t determine their tax policy based on what benefits professional sports teams, their billionaire owners, and multi-millionaire players. The government already does too much for professional sports. Some examples include taxpayer-funded stadiums, eminent domain in stadium construction, minimum-wage exemptions for Minor League Baseball players, and anti-trust exemptions. Additionally, the National Football League paid no federal income tax from 1942 to 2015.
Government policies help some professional sports teams and harm others. While Massachusetts now has another funding source available for public education, transit, and infrastructure, it also benefitted the other 29 MLB teams by making Boston a less attractive place to play. If used properly, the new funding could help the state meet the demand for vocational high schools and reduce its reliance on regressive means of funding roads and education, including property taxes. However, if the state spends the money inefficiently, we may get more diversity, equity, and inclusion hacks in the state college system—in addition to a World Series drought for the Red Sox.