Did High Taxes Help Phillies Land Cliff Lee?
Many baseball fans and sports writers woke up yesterday morning scratching their heads to Cliff Lee’s decision to turn down a deal worth $154 million over 7 years with the New York Yankees to join the Philadelphia Phillies for a mere $120 million over 5 years. As ESPN columnist Jayson Stark put it, “Does anyone out there remember anything like this — a player who’d been portrayed as being obsessed with getting every possible dollar out there, who then decided he didn’t really need, like, 30 million of those dollars after all? Unbelievable.”
Although it’s possible that Mr. Lee was inspired by the season of giving, he is more likely driven by his pocketbook than anything else. You could mention, of course, that the average annual salary associated with the Philadelphia contract comes out to $2 million more per year than what the Yankees were offering, but that still leaves over $30 million on the table in New York. But this isn’t the whole story, as Cliff Lee stands to pay considerably less in taxes by going to Philadelphia rather than New York. Here’s the math: (more…)