Recently, there’s been some chatter in the tax and economics world about taxing star athletes more to make their pay proportional to the value they provide.
One side argues that stars are rightly paid more because they’re rare—that is, their value is tied to scarcity. The other side counters that their prowess is tied mostly to luck and their relative additional value over a regular athlete, vis-à-vis spectator turnout, is marginal. They’re earning “scarcity rents” that should be curtailed.
The bit about luck has some truth to it. And tax policymakers generally oppose windfalls due to happenstance—see estate taxes and calls for windfall taxes on sectors of the economy viewed as prospering from Covid-19. It’s also possible that stars don’t attract that many more spectators than do average athletes.
However, when Shohei Ohtani signs his massive contract next year, he’ll do so with whatever team sees a comparable value in adding an MVP-caliber pitcher and hitter to their roster. To tax him for capitalizing on his good luck and hard work while leaving the ownership to reap the rewards of exploiting his talent seems backward.
If Ohtani doesn’t deserve to be paid beyond the additional spectators he attracts, perhaps team ownership shouldn’t get paid at all. No one has tuned in to a baseball game to see an owner do anything since George Steinbrenner fired Billy Martin five times.
While you’re watching Ohtani hit dingers and throw shutouts, we here at Bloomberg Tax are thinking about the implications for tax policy.
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Look for Leahey’s column on Bloomberg Tax, and follow him on Mastodon at @andrew@esq.social
State Insights
A new tax credit for remote workers in New Jersey should prompt Congress or the Supreme Court to address states’ limitations to tax remote workers, say Adam P. Beckerink and Dakota Newton of Duane Morris.
AB FinWright’s Rachel Wright, Abraham Finberg, and Simon Menkes share how legal cannabis businesses in New York can use the qualified New York manufacturer credit to ease their tax burdens.
Federal Insights
James Hendershot of Stout and Luis Galarza of ERM explain how sustainability initiatives can improve the quality of a company’s net earnings before interest, taxes, depreciation, and amortization, or EBITDA.
Recent IRS guidance on crypto staking income may not be the final word on the issue, as a federal appeals court weighs a Tennessee couple’s arguments against the agency, says Glassnode’s David Canedo.
With many federal gift and estate tax exclusions set to expire in about 18 months, Baker Tilly’s Michael Lum says now is the time to consider transferring family assets to protect intergenerational wealth.
A recent IRS memo on research and development tax credits clarifies that activities outside traditional medical and defense research can qualify for the tax break, say EisnerAmper’s Alexandra Colman and Stephen Boncimino.
Global Insights
Dimitar Hadjiveltchev of CMS France explains the inheritance tax issues that may threaten the future of a family-owned vineyard and how careful legal planning can help.
Takato Masuda of Nishimura & Asahi discusses progress in implementing the global minimum tax in Japan and the government’s approach to the related tax policy issues that have arisen.
Columnist Corner
Wealthy individuals are donating their properties to their own private foundations, enabling them to take large tax deductions. In this week’s Technically Speaking, Andrew Leahey discusses the need for increased IRS funding and stricter rules to curtail abuses.
Career Moves
Robert Rizzi has joined Holland & Knight as a partner in its tax, executive compensation, and benefits practice in Washington, D.C.
Agustin Ceballos and Daniel Silva have joined Buchalter in the San Diego office.
Lee Ellis has joined KPMG Law as a partner focused on tax disputes in Leeds and Manchester in the UK.
If you are changing jobs or being promoted, let us know. You can email your submission to TaxMoves@bloombergindustry.com for consideration.
News Roundup
It’s been another busy week in tax news from state capitals to Washington. Here are some stories you might have missed from our Bloomberg Tax news team.
*Note: Your Bloomberg Tax login is required to access Tax News.
- State sales tax holidays are expanding, encompassing not just the familiar back-to-school purchases, but entirely new categories of products that will require more merchants to adjust how they collect taxes.
- New Jersey leaders want a law they just enacted to lead to a legal showdown with New York over its rules for taxing telecommuters. But the prospects are challenging even as remote work lifestyles flourish.
- SpaceX says a California property tax exemption is responsible for its rapid growth over the past 10 years, but no data is available to tie that growth directly to the exemption. California lawmakers want to find out how much it matters.
- The Treasury Department and IRS has released final rules on the tax-and-climate law’s bonus credits for solar and wind facilities in low-income communities.
Tax Journals
While pension risk transfer purchases are more popular than ever, fiduciaries need to make sure not to transfer phantom participants who may present real problems later, advises Michael Schloss of The Wagner Law Group.
*Note: Your Bloomberg Tax login is required to access Tax Journal articles.
Attention Law Students
Do you have an original take on the law—but you’re not a lawyer yet? Our student writing competition is the perfect opportunity to show off your work.
We invite students to choose an area of law and technology and describe how it might be tested in courts, update past practices, or force a rethinking of the legal landscape.
We’ll publish the winning entry in December, and the student with the winning entry will get a swag bag of Bloomberg Industry Group products.
Our Wish List
Back-to-school season is starting. For August, we’d welcome submissions on sales tax holidays and educational credits. We’re also seeking articles that discuss tax considerations of college tuition payments.
If you have an interesting, never-published article for publication, you can contact our Insights team by email at TaxInsights@bloombergindustry.com.
Our Team
We talk about tax a lot. But there’s much more that you might hear us talking about if you popped into one of our Teams meetings. Here’s a quick look at what some of us are watching, reading, and listening to this week.
Watching
Andrew Leahey (Columnist): My daughter is in a summer production of “Matilda Jr.,” so I’ve been watching clips of Netflix’s “Matilda,” YouTube videos of other “Matilda” productions, and just generally steeping in all things “Matilda.”
Reading
Melanie Cohen (Content Editor): “Flowers of Fire,” a history of South Korea’s #MeToo and feminist movements.
Listening
Rebecca Baker (Editor-at-Large): Slate Culture Gabfest’s annual “Summer Strut” compilation on Spotify. Always a great collection of bangers—this year even more so.
Stay Connected
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