Patrick Mahomes, the star quarterback of the Kansas City Chiefs has become the poster boy of the league in super quick time which is why, he draws a hefty salary every season. Last year, the two-time Super Bowl winner earned a whopping $45 million. However, he had to pay $405,000 out of his salary in Michael Jordan tax, aka jock tax, as reported by Mark H of ProSportMoney.
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Jock tax rule forces athletes to pay an income tax in each state where they play a game. The modern jock tax came into effect after the 1990 NBA finals between the Los Angeles Lakers and the Chicago Bulls and because MJ was at the centre of all that had transpired, some also like referring to it as ‘The Michael Jordan’ tax.
Patrick Mahomes made $45 million last year.
But, he paid $405K in Jock Taxes.
What?
Athletes file over 10 tax returns each year to states they don't even live in.
And this is because of Michael Jordan.
Here’s the breakdown: 👇 pic.twitter.com/u12O6SYa3W
— Mark (@ProSportMoney) May 20, 2023
How the ‘Michael Jordan Tax’ came into being
The jock tax became particularly significant for Jordan during the 1991 NBA Finals when his Chicago Bulls faced the Los Angeles Lakers. The series spanned multiple games in both Illinois and California. After Jordan’s unit ended up winning the finals, his accountants were asked by the state of California to pay taxes because of all the dollars MJ had earned by playing in their state.
1) The "Jock Tax" became famous in 1991.
Michael Jordan and the Chicago Bulls had just beaten the LA Lakers in the NBA Finals.
But after the championship parade, MJ's accountant received a notice from California saying MJ owed $10,000 in taxes for the games he played in LA.
— Joe Pompliano (@JoePompliano) April 17, 2023
Innumerable fans had called out the State of California for being unnecessarily bitter. To ensure that equality prevailed, Illinois passed a bill which came to known as the ‘Michael Jordan’s Revenge’ bill under which, the state was allowed to collect taxes from California-based athletes.
This rule was also applicable on other states which collected Jock tax from athletes who were from Illinois. As it turns out, Jock tax was applicable even before the Jordan fiasco happened. However, states didn’t collect it that judiciously.
Cold War between states caused substantial damage to Mahomes’ wallet
The jock tax was implemented as a means for states to capture a portion of the income earned by professional athletes who compete in their jurisdictions. Before the Jock tax, athletes’ income from games or events played in different states often went untaxed, as they were not residents of those states and didn’t have a physical presence there for an extended period.
However, as soon as the taxation war between Illinois and California started, other states sensed this opportunity to make some more bucks. Today, almost every state which hosts marquee sporting events, makes use of the Jock Tax policy. So what started as a cold war between two states after NBA championship finals, has now resulted in Patrick Mahomes nd a host of other athletes paying millions in taxes from their pockets.
However, the $405,000 dent is probably not going to impact Mahomes that much as the Chiefs are ready to re-negotiate his $503 Million deal after which, Patrick is expected to become the highest earning QB in the competition.
