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Did the Income Tax Rate Help the Cubs Sign Jon Lester?

Did the Income Tax Rate Help the Cubs Sign Jon Lester?

Posted On
December 12
By
Stefan Schumacher
When the Chicago Cubs signed ace pitcher Jon Lester to their payroll with a six-year, $155 million deal, much of the excitement centered around matters related to baseball.

The Cubs were ready to contend again. The Lester contract, while maybe being more than the Cubs should have paid over that many years, signified relevance for the long struggling franchise. With General Manager Theo Epstein – who’d worked with Lester when he played for the Boston Red Sox – they’ve been completely rebuilding the organization around young talent nurtured in their minor league farm system.

But part of the reason Lester signed the contract with the Cubs rather than the Red Sox or one of the California teams (namely the San Francisco Giants) may have more to do with state income tax rates than the rise of the young Cubs.

Not Going to San Francisco

The Giants reportedly offered Lester a $150 million contract. Sounds pretty good when you consider he’d be going to the World Series champion and he’d be able to live in a great city with a mild climate.

The problem is the California state income tax rate – it’s the highest in the country at 13.3 percent. That would’ve cost Lester roughly $19.5 million over the life of the contract (see our chart above to see just how much more a player can make on a $150 million contract depending on the team he goes to and the state he plays in).

In Illinois, meanwhile, where the income tax rate is just 5 percent, he’d only lose $7.75 million over the course of the contract. The rate in Massachusetts isn’t much different than Illinois at 5.2 percent, but the Red Sox were offering Lester $20 million less than the Cubs, according to the USA Today.

Another player who may be happy to be back in Chicago is former Cub, Jeff Samardzija. After being traded to Oakland from the Cubs last year, the Chicago White Sox have traded for him and perhaps they have a leg up now in signing him to a long-term deal. He has one year left on his contract.

The $200 Million Man Pays a Lot in Taxes

Much was made of Los Angeles Dodgers’ pitcher Clayton Kershaw’s $215 million contract at the beginning of the year that made him the first $200 million pitcher in baseball’s history, however he could’ve presumably made a lot more in other places – almost any other place.

Kershaw’s contract, if he stays in California, will have him paying some $28.5 million in income taxes over seven years.

If he really wanted to make the most of his money, he could’ve gone to the Miami Marlins or the Texas Rangers, where the income tax costs their players a sum total of nothing. The Seattle Mariners in Washington are also not subject to an income tax, although their minimum wage is highest.

A Low Income Tax Doesn’t Necessarily Help You Win

Of course, the high tax rates in California haven’t stopped the Giants from winning. They’ve won three of the last five World Series titles.

New York’s income tax rate is 8.82 percent and certainly the Yankees haven’t struggled to secure big name players in free agency.

Pennsylvania’s income tax rate is only 3.07 percent and the Pittsburgh Pirates aren’t exactly a hot spot landing place.

In other sports we’ve seen big names go to Florida – Lebron James, Tracy McGrady, Grant Hill in the NBA. But there’s no way to tell what their real motivations were.

It was 1908 when the Cubs won their most recent world championship, so the tax rates – or anything else for that matter – haven’t helped them.

Perhaps Lester, one of the game’s top pitchers, is a big step towards ending the Cubs’ seemingly endless streak of futility. And hopefully he signed with the team for more than just the money.

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