Tyreek Hill Moved to Lower His State Taxes, and He’s Not Alone

NFL player Tyreek Hill does not have the luxury of working from home. But for an eye-popping, four-year $120 million deal with the Miami Dolphins, the star wideout won’t complain about his demanding career. He does, however, have something in common with many Americans who will never set foot on the gridiron: He factored his state income tax liability into his decision of where to live and work.

By his own account, Hill almost signed with the New York Jets before accepting an offer with the Miami Dolphins, based in income-tax-free Florida. The Jets deal was “very close to happening,” but “those state taxes, man. I had to make a grown-up decision,” Hill told reporters.

It’s hard to blame him. Playing for the Dolphins rather than the Jets is saving him an estimated $2.7 million in state and local income taxes this season alone, with three more seasons to go on his contract. Had he signed with the Jets, he would have paid $2,984,409 to New Jersey and $207,559 to other states, for a combined $3,191,968. With the Dolphins, he’ll owe an estimated $474,519 to other states where he plays, but not one cent of income tax to Florida.

Another Florida NFL star, Tom Brady, is playing on a $15 million contract in Tampa this year and owes only $164,407 in taxes (all out-of-state) compared with the $863,170—still relatively modest—he would have owed if he still played for the New England Patriots.

Professional athletes’ financials don’t look like yours or mine. But in an outsized way, their experience does shed light on tax considerations relevant to the millions of Americans who now work remotely and the tens of millions who enjoy additional workplace flexibility.

States levy income taxes both where you live and where you work. To avoid double taxation, when you pay taxes to a non-domiciliary state where you worked for part of the year, your home state provides a credit for the taxes you paid to that state—up to the amount you would have paid your home state on that additional income. But if the second state has a higher rate than your home state does on that income, you do not receive a credit for the excess amount.

Imagine that Hill played for the Arizona Cardinals this season. Arizona’s top marginal rate is 4.5% (dropping to a 2.5% flat tax next year), which is lower than the marginal rates he would face in several states in which he would play. Playing for Arizona, he would owe $333,704 in taxes to other states but only have $192,631 of that credited against his home state tax liability.

Athletes are not alone in owing taxes to non-domiciliary states in which they work, often after a single day—remote workers do, too. Some states, however, adopt reasonable thresholds, like allowing someone to spend up to 30 days in the state before having an income tax obligation there. As workers become more mobile, every state should adopt these so-called “mobile workforce” thresholds.

But while better rules may help you and me, they wouldn’t aid Hill. Athletes and other highly compensated entertainers are subject to distinct income tax rules, often called jock taxes, that ensure they’re taxed even if they are only in the state briefly. Calculations are typically based on duty days—the number of days they spent in that state as a percentage of their season.

If we make some simplifying assumptions, like that Hill spends three duty days in another state for each out-of-state away game, we can calculate his estimated tax liability—to his home state and other states—had he signed with each team in the league.

A stint with the Houston Texans would have cost him the least ($178,534, all to other states), while any of the three California-based franchises would have yielded a whopping $3,963,102 tax bill. Amusingly, Miami’s schedule yields the highest out-of-state liability in the league, well above the average of about $300,000. But schedule-based variations in out-of-state taxes pale in comparison to taxes Hill would owe to his own state.

Like most people, Hill probably didn’t make his decision exclusively based on taxes, but there is no reason to doubt him when he says they factored into his analysis. In an era of increased workplace flexibility, where many employees can live and work from just about anywhere, it factors into the decision-making of plenty of people who will never play professional sports.

Sometimes there is a straight line of causality, with people seeking out lower-tax jurisdictions. Other times, the connection is indirect. People may prefer better job opportunities, a lower cost of living, or a higher quality of life that stems, at least in part, from a state’s decision to prioritize economic competitiveness through its tax code.

When states impose higher tax burdens, employers must pay more just to remain competitive with employers elsewhere. But the additional wages aren’t helping their employees, who turn around and pay them in taxes; it’s just an added cost of doing business in a higher-tax state. It reduces employment, productivity, investment, and after-tax income. Studies repeatedly find that higher income taxes are associated with inferior economic outcomes, from out-migration of individuals to reduced business activity and lower rates of employment.

Most studies focus on the broader economy, but several explore the implications of income taxes in the world of professional sports. Earlier this year, a new study found that for each percentage point increase in state income tax rates, team winning declines by 0.7 percentage points.

As individuals and businesses navigate an increasingly mobile post-pandemic economy, states are jockeying to remain competitive. Dozens have cut the rates of major taxes since 2021, including 21 that have cut individual income tax rates. States clinging stubbornly to high rates, and uncompetitive tax structures may find themselves losing out on far more than just a star wide receiver.

This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Jared Walczak is vice president of state projects with the Center for State Tax Policy at the Tax Foundation. You can follow him on Twitter at @JaredWalczak.

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