Is Phil Mickelson's California Tax Bill Too Much?
Phil Mickelson Wins British Open—And California Taxes It
Tax relief is what Phil Mickelson needs after his CA tax bill from the British Open. According to Sports Illustrated, Phil Mickelson made $36 million last year from his sponsors. Companies such as KPMG, Barclays, and Callaway endorse Mickelson. His recent win in the British Open escalates his endorsement and marketing appeal, which will mean even more revenue in the future. However, with more revenue, there will be more taxes.
Although Mickelson currently resides in a high-tax California home, he has become a poster-child for selecting residency based on tax law. Mickelson found himself in the news after he announced that his taxes were high and that he would have to look at all available options. He even withdrew his offer to purchase the San Diego Padres, announcing that high tax rates were the motivating factor for this decision.
“There are going to be some drastic changes for me because I happen to be in that zone that has been targeted both federally and by the state and it doesn’t work for me right now,” Mickelson made this statement after his T37 finish at the Humana Challenge in Palm Springs. Although his tax comments were disciplined by any standard, they still triggered an outcry. He apologized, but even that the apology created a strong reaction from observers who liked the fact that he cited high taxes.
Most states and countries tax entertainers and athletes when they perform or play within their confines. Foreign entertainers and athletes must file U.S. income tax returns and face distinctive withholding rules. Such income usually includes endorsements, merchandise sales, pay for performances, royalties and other income associated with the event. However, as a California resident, California gets a portion of it all.
Tiger Woods has said that California’s high taxes were one of the reasons he moved to Florida in the 1990’s. Since that time, the state’s tax rates have increased even more. California’s Prop 30 which was passed in November of 2012 increased state tax rates for those earning $250,000 to $300,000 a year from 9.3% to 10.3%. For those earning over $1 million, the rate is 13.3%, up from a prior top rate of 10.3%. In comparison, the combined state and local top rate in New York is 12.7%.
One survey shows that jobs, housing costs, family ties and climate are usually more important than tax rates in determining where people choose to reside. Apparently even wealthy taxpayers normally don’t move for tax reasons. However, this may not hold true for a professional athlete who is not tied to a particular team. If Phil Mickelson decides to move, he will not be the only one running from high taxes. Should he stay in California, his tax will probably increase even more. This could make a move to Texas or Florida very appealing.
If you have tax questions or a tax debt you are unable to pay, our tax settlement professionals are happy to discuss your tax resolution options free of charge. For more information about our services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527. With over 16 years in the business of resolving tax debt, we have a thorough understanding of tax law together with the experience to know which settlement option will be the best fit for your specific set of circumstances