In this article, the authors examine the impact on the salaries of free agents in Major League Baseball (MLB) of differences in state and local individual income taxes between major league cities, in an attempt to see if income taxes affect player salaries. This basic specification suggests that each percentage point of an income tax raises free agent salaries by $21,000 to $24,000; other estimates indicate even larger impacts. These findings suggest that the existence of this additional salary demand means that low-tax cities (e.g., Florida, Texas, and Washington) have a “home field advantage” in the baseball free agent market.
AlmJ.WallaceS. (2000). Are the rich different?. In SlemrodJ. (Ed.), Does atlas shrug? The economic consequences of taxing the rich (pp. 165–187). New York, NY: Russell Sage Foundation at Harvard University Press.
2.
BakijaJ.SlemrodJ. (2004). Do the rich flee from high tax states? Evidence from federal estate tax returns. NBER Working Paper No. 10645, Cambridge, MA
3.
BargerP. (1999). State taxation of nonresident professional athletes: The need for Congressional intervention. State Tax Notes, 17, 703–709.
4.
BradburyJ. C. (2007). Does the baseball labor market properly value pitchers?. Journal of Sports Economics, 8, 616–632.
5.
BrownK. H.JepsenL. K. (2009). The impact of team revenues on MLB salaries. Journal of Sports Economics, 10, 192–203.
6.
EkmekjianE. C. (1994). The jock tax: State and local income taxation of professional athletes. Seton Hall Journal of Sport Law, 4, 229–252.
7.
FortR. (1992). Pay and performance: Is the field of dreams barren?. In SommersP. M. (Ed.), Diamonds are forever: The business of baseball (pp. 134–160). Washington, DC: Brookings Institution.
8.
FortR. (2009). Observation, replication, and measurement in sports economics. Journal of Sports Economics, 11, 3–16.
9.
FullertonD.MetcalfG. E. (2002). Tax incidence. In AuerbachA. J.FeldsteinM. (Eds.), Handbook of public economics (pp. 1787–1872). Vol. 4, Amsterdam, Netherlands: Elsevier Science.
10.
GoolsbeeA. (2000). What happens when you tax the rich? Evidence from executive compensation. Journal of Political Economy, 108, 352–378.
11.
GreenR. E. (1998). The taxing profession of major league baseball: A comparative analysis of nonresident taxation. Sports Lawyer Journal, 5, 273–301.
12.
HausmanJ. (1978). Specification tests in econometrics. Econometrica, 46, 1251–1271.
13.
HawkinsR.SlayT.WallaceS. (2002). Play here, pay here: An analysis of state income taxes on athletes. State Tax Notes, 26, 551–555.
14.
HealyA. (2008). Do firms have short memories? Evidence from major league baseball. Journal of Sports Economics, 9, 407–424.
15.
HoffmanD. K. (2002). State income taxation of nonresident professional athletes. Tax Notes, 26, 1083–1091.
16.
HsiaoC. (1986). Analysis of panel data. New York, NY: Cambridge University Press.
17.
JamesB. (1989). . In This time let’s not eat the bones. New York, NY: Random House.
18.
JamesB. (2001). . In The new Bill James historical abstract. New York, NY: Simon & Schuster.
19.
JamesB. (2011). . In The Bill James handbook. Chicago, IL: ACTA.
20.
KopkinN., (2012). Tax avoidance: How income tax rates affect the labor migration of decisions of NBA free agents. Journal of Sports Economics, 13, 571–602.
21.
KrautmannA. C. (1999). What’s wrong with Scully’s estimates of a player’s marginal revenue product?. Economic Inquiry, 37, 369–381.
22.
KrautmannA. C.GustafsonE.HadleyL. (2003). A note on the structural stability of salary equations: Major league pitchers. Journal of Sports Economics, 4, 56–63.
23.
KrautmannA. C.SolowJ. L. (2009). The dynamics of performance over the duration of major league baseball long-term contracts. Journal of Sports Economics, 10, 6–22.
24.
NollG. R.ZimbalistA. (Eds.). (1997). . In Sports, jobs and taxes. Washington, DC: Brookings Institution.
25.
RingleL. A. (1995). State and local taxation of professional athletes. Sports Lawyer Journal, 2, 169–181.
26.
ScullyG. W. (1974). Pay and performance in major league baseball. American Economic Review, 64, 915–930.
27.
SolowJ. L.KrautmannA. C. (2011). A Nash bargaining model of the salaries of elite free agents. Journal of Sports Economics, 12, 309–316.
28.
ThornJ.PalmerP.GershmanM (2004). . In Total baseball—The official encyclopedia of major league baseball. 8th ed.
Kingston, NY: Total Sports.
29.
WhiteH. (1980). A heteroskedasticity-consistent covariance matrix estimator and a direct test for heteroskedasticity. Econometrica, 48, 817–838.
30.
YoungC.VarnerC. (2011). Millionaire migration and state taxation of top incomes: Evidence from a natural experiment. National Tax Journal, 62, 255–284.
31.
ZimbalistA. (1992). Salaries and performance: Beyond the Scully model. In SommersP. M. (Ed.), Diamonds are forever: The business of baseball (pp. 109–133). Washington, DC: Brookings Institution.
