(Update: A reader sent an email last night suggesting that Pacquiao’s manager’s tax calculation of $10 million was too high since all of Pacquiao’s income would not be taxed at the highest tax rate. To clarify, that is correct since we have a progressive tax system (and, as was pointed out to me in the same email, there is no personal income tax in Nevada). Taxes would likely be closer to $8.5 million, assuming no deductions, etc. I’m guessing Pacquiao has a decent team of advisors to figure that out for him. Thanks, David, for the reminder!)
What happens in Vegas stays in Vegas. It also gets taxed in Vegas – which is why Manny Pacquiao is hoping to take his boxing gloves elsewhere. The Filipino native is in talks to fight for a fifth time against Juan Manuel Marquez in the fall of 2013 but Vegas is likely not the destination. Pacquiao is hoping to land instead in tax-favored Macau.
Pacquiao, who will likely be paid close to $25 million for the fight, doesn’t want to pay U.S. taxes. His manager said, about the fight, “Manny can go back to Las Vegas and make $25 million, but how much of it will he end up with – $15 million?”
But while Pacquiao would benefit from the move, his promoters would not. According to Pacquiao’s manager, a match outside of North America would result in a dramatic reduction in ticket sales. That means less money for the fight promoters, cable companies, and sponsors. Everybody loses – except for Pacquiao, that is.
Pacquiao’s most recent fight, in which he was knocked out by Marquez in the sixth round, took place in December 2012 in Vegas. That fight scored high in the ratings and a subsequent fight would, it is believed, be an even bigger draw.
For his part, however, Marquez isn’t so sure that he even wants to fight Pacquiao. He told boxingscene.com, “I think for me there is no point [in a fifth fight]. We already achieved the desired result.” Pacquiao’s manager is singing a different tune, merely saying that “Juan hasn’t expressed the same concern about U.S. taxes that Manny has.”
As the two scramble to work out the details, the focus is again sharply turned on U.S tax rates. Tax forum shopping is becoming something of a trend these days with athletes, in particular, hopping from venue to venue in an effort to maximize their after-tax profits. I get it. Who doesn’t want to pay less in taxes?
But I refuse to get on the “give them a break” bandwagon.
Don’t get me wrong: I love sports. I’ve been dancing on air all week because pitchers and catchers are finally reporting to Clearwater. I was genuinely bummed to spend an entire Sunday knowing that there wasn’t a single football game on TV. And the email announcement that a local pub was showing the Rugby Sevens live made my day.
But as much as I like to watch sports on TV and in person, I don’t think that showing up and doing a job (even if they do it really, really well) makes athletes gods. Granted, Usain Bolt can run a lot faster than I can. And Mickelson can swing a club a bazillion times better than me. But why should that equal a break when it comes to taxes? Does it make either of them better than a doctor? A teacher? An entrepreneur?
It’s not even about the money. Despite the hemming and hawing over Mickelson’s statements, this debate isn’t about class warfare. It’s not decrying – or supporting – more taxes on the rich. As a nation, we seem pretty comfortable with the idea that the wealthy should pay their “fair share” of taxes (whatever that means). So it’s not about the dollars. It’s the notion that somehow Bill Gates should pay his taxes but Tiger Woods should get a pass. Because … why exactly? Somehow we’ve decided that sports figures should be elevated to nearly tax-exempt heights.
And it’s not just in the U.S.
In Spain, a special law was passed to benefit wealthy foreigners. The law became known as Beckham’s Law, or Beckham’s Tax, because David Beckham was one of the first foreigners to take advantage of it, likely, rumor had it, because the law was actually written for the footballer when he played for Real Madrid. In the UK, political leaders scrambled to find a fix when Usain Bolt announced that he might not come to the country to race prior to the Olympics because of the tax burden; the UK made similar noise about accommodating golfer Tiger Woods and tennis phenom Rafael Nadal.
I can’t imagine that Pacquiao is going to get any special federal tax treatment if he were to stay in the U.S. to fight another day. The fact that he isn’t a U.S. citizen certainly isn’t going to work in his favor (he is, in fact, a Congressman in his home country of the Philippines). But I wouldn’t put it past some lawmaker somewhere to go begging for tax favors of some sort on his behalf.
The fact that he will publicly flaunt his disdain for paying taxes in a country that even his manager acknowledges has been very good to him (all but three of his professional fights in the last ten years have taken place in the United States where he enjoys enormous popularity) is just irritating. None of us like to pay taxes. Most of us, however, don’t stand up and say loudly, “Well, I was going to do my job today, but you know, taxes and all…” We simply go to work. Might I suggest that Pacquiao do the same?
