How Cities Use the 'Jock Tax' To Screw Over Athletes

This past Wednesday, the Ohio Supreme Court heard arguments in the separate lawsuits former NFL players Hunter Hillenmeyer and Jeff Saturday have filed against the city of Cleveland over its "jock tax" laws. Most workers who spend fewer than 12 work days in the city cannot be charged municipal income taxes, but in some Ohio cities, entertainers and athletes are exempt from the 12-day rule. Jock taxes are an easy sell for politicians, as they target high earners from outside the area with extremely public lives and salaries. The cases brought by Hillenmeyer and Saturday, however, expose the absurdities of such laws.

While Cleveland is one of eight cities statewide with such an exemption, it has become a litigation target due to its aggressive calculation of taxes owed. Moreover, the Saturday and Hillenmeyer suits are part of a broader, nationwide fight against jock taxes spearheaded by players unions. In April, Tennessee lawmakers voted to repeal its jock tax after the NHLPA threatened litigation. But that fight didn't reach the courts, and as such, the Cleveland suits could be critical in the precedent they set.

Hillenmeyer played eight years in the National Football League, all as a member of the Chicago Bears. In 2005, Hillenmeyer played his only regular season NFL game in Cleveland, a 20-10 loss in which Hillenmeyer recorded seven tackles. In 2004 and 2006, Hillenmeyer played exhibition games in Cleveland as well. Most jock tax cities would have taxed Hillenmeyer on what is called a "duty days" basis--Hillenmeyer spent two days in the city each year and thus would be taxed on roughly 1/170th of his income, according to Chris Stephens of the Tax Foundation. The city of Cleveland, however, taxed Hillenmeyer on a "games-played" basis. As such, 1/20th of his income was taxed, a difference of over $5,000.

Saturday's case is even stronger, as he never even stepped foot in the city of Cleveland for the Indianapolis Colts' scheduled game against the Browns in 2008. The man best known as Peyton Manning's center was injured with a strained calf and didn't travel to Cleveland for the November matchup.

No matter: Cleveland still applied the "games-played" taxation method to Saturday and taxed him an extra $3,294.

The issue with the "games-played" calculation becomes particularly obvious in Saturday's case. Cleveland has argued in a brief that their higher tax rate is legal because, "The 'games-played' method is certainly reasonable…since players are paid to do one thing - play in games." As Ohio Supreme Court Justice Bill O'Neill said in Wednesday's arguments, by the city's logic, "Cleveland should have taxed the groundskeeper in Indianapolis that day." While athletes may only work in public on game day, they are clearly paid for other activities--practice and injury rehabilitation being two of the most obvious. The "duty days" calculation includes meetings, training camps, mini-camps, and any other team activity, not only games.

The stakes are quite high for the city of Cleveland, which stated in a "Revenue Impact Analysis" that the move from "games-played" to "duty days" would cause a "conservative estimate" of $1,000,000 in lost revenue per season--roughly $700,000 of which comes from NFL players. (For reference, the city collects $300,000,000 in taxes in a typical year.) The city has claimed it is "perfectly rational" to allow cities to selectively tax an "easy-to-identify, high-end source of revenue" like an athlete. This is precisely what Hillenmeyer's lawsuit is fighting against, as he alleges this selection violates the "equal protection" clauses of both the Ohio and United States Constitutions.

The relative stakes are light for both Saturday and Hillenmeyer, who enjoyed long NFL career and each earned millions of dollars as players. The jock tax, however, has been targeted by players unions in all major sports for years, and players unions from the NFL, MLB, NBA, and NHL all filed a legal brief in support of both Hillenmeyer's and Saturday's claims in September. These low stakes for the players filing the lawsuits are part of the reason why Cleveland's collection method has been able to go unchallenged for so long--those who could afford the legal costs necessary to file suit for an uncertain, relatively meager payout were already set for life.

In his lawsuit, Hillenmeyer notes Ohio is ignoring the remarkably short and dangerous nature of athletic careers. The average NFL career lasts merely three years. Most players will not be financially set for life after their career, and many will have large and constantly growing medical bills to treat conditions ranging from arthritis to CTE.

Plenty of eyes will be on this suit as jock taxes are, ironically enough, a popular solution to offsetting the costs of publicly funded stadiums. State Solicitor Eric Murphy even noted in the Attorney General's brief supporting the jock tax, "Indeed, in this case, the public even built Hillenmeyer's workplace - the stadium - that made his income earned in Cleveland possible." The city of Milwaukee is exploring using a jock tax to support a potential new arena for the Bucks. New NBA commissioner Adam Silver has been clear about wanting Milwaukee to become the model for new arenas, and it wouldn't be surprising if this tactic becomes adopted elsewhere as the frenzy for new publicly funded stadiums continues. One Milwaukee-based group, Common Ground, has already organized against the jock tax on the basis that it would earmark public money away from necessary services like education and healthcare.

Athletes are easy targets, one of the few groups of high earners with highly public schedules and salaries. State Solicitor Murphy put it plainly--these athletes are being targeted because the state knows it can get away with it. These taxes are often directed right back to paying for stadium debt, as proposed in Milwaukee. Instead of targeting the owners or refusing to pay for their extravagant stadiums, cities are targeting athletes because it's the easy thing to do. Legally and morally, that's a dubious argument.