04/20/24
January 30, 2014
Why Aren't More Americans Playing in Europe?: Though it seemed for a few years that the best American players would crash the top levels of soccer in Europe, these days the biggest signings are when they come home to the MLS, writes Roger Bennett of ESPNFC. The appeal of playing in Europe is dimming, said Herculez Gomez. "There are other places that are more lucrative from a financial perspective. As they say about the Premier League, it is glitz, glamour and 50 percent tax."
I was stunned to hear that Ronaldo's new contract stipulates the team covers all the tax; is that common for superstars?
How is that even possible? Wouldn't the team's payment of his tax be taxable compensation? It's taxes all the way down.
posted by rcade at 08:14 AM on January 31, 2014
How is that even possible? Wouldn't the team's payment of his tax be taxable compensation? It's taxes all the way down.
I have heard of this before and became popular during the economic downturn in 2008 & 2009.
The tax is taxable income. So assume 50% tax if a player wants $1M a year, his actual salary is $2M. The benefit to the player with this clause is if the local government raises taxes, like during an economic downturn, he gets an automatic raise to cover the new tax without renegotiating the contract.
I also wonder if European soccer players have similar problem to some US athletes. I have heard of high paying US athletes that have to pay taxes to the local authorities for away games. Players at clubs in CL and Europa could have similar problem.
posted by gscheetz at 08:33 AM on January 31, 2014
How is that even possible? Wouldn't the team's payment of his tax be taxable compensation? It's taxes all the way down.
You don't go down, you go up.
If Ronaldo is getting paid 10,000,000 Euros, and we assume that he'll be taxed a total of 38% on that, then the team would ACTUALLY pay him an equivalent salary that, when the taxes are applied, would leave him with 10,000,000 Euros.
To calculate the new salary you multiply the old salary by (1/[1-x]), where x = the tax rate (0.38).
For our example, Ronaldo's salary would be:
10,000,000*(1/[1-0.38])
10,000,000*(1/[0.62])
10,000,000*(1.612903226)
16,129,032.26
Edit: just a longer version of what gscheetz said (with more math)
posted by grum@work at 08:48 AM on January 31, 2014
It's taxes all the way down.
What grum said. Here's the best link I could find with details: "€17 million in clean salary to the player and €18.3 to the Treasury, as the current rate in Madrid is 51.9%."
posted by yerfatma at 08:49 AM on January 31, 2014
This tells me that state governments in the U.S. could get a lot of money by soaking pro athletes. A pity all the soaking is going in the other direction.
Regarding Gomez' comments, he's talking about the kinds of players who would get the top MLS contracts. Any American capable of making a big splash in Europe would get a star salary back home. Clint Dempsey wasn't weighing a Premiership deal vs. a $150,000 salary in the U.S.
I am going to get into the MLS more, now that it has come to Orlando. But I am disappointed to see the top Americans playing here (aside from goalies). I loved it when Dempsey was in England.
posted by rcade at 09:03 AM on January 31, 2014
This tells me that state governments in the U.S. could get a lot of money by soaking pro athletes. A pity all the soaking is going in the other direction.
"Like many states, Tennessee charges opposing athletes a tax when they visit for games. But Tennessee is the only one to charge the same flat rate to LeBron James, who makes about $19 million a year, and Wolters, who makes $500,000. Tennessee's rate is $2,500 a game, with a maximum charge of $7,500 a year."More on "jock taxes". The state of New Jersey will be making at least 6 figures on the athletes alone. Peyton Manning will pay $57,000 in taxes for his 10 day visit to the state. So, in sum, the states hand cash out to the owners and squeeze the players.
posted by yerfatma at 09:58 AM on January 31, 2014
I think I remember players were happy when the Thrashers moved out of Atlanta for that reason. They got taxed higher on their game check in GA when they played There.
posted by Debo270 at 12:57 PM on January 31, 2014
The section about scouting, agents and the successful Americans in Europe being late flourishers rings true: is a talented 16-year old going to close the door on a college scholarship in order to seek a professional club overseas, especially when European clubs are already sceptical about the US development model? The Red Bulls' GM wants a professional development league for 17- to 21-year-olds, which would be a direct competitor to the college route, but it would be a system that foreign teams understood and might be more willing to respect.
posted by etagloh at 09:18 PM on January 31, 2014
Data point: Juventus just offered $1M for a 16 year old center back on the books of Sporting KC and the kid isn't (yet) a starter. Remember that Neven Subotic and Giuseppe Rossi both developed their games in the States, though Rossi went to Europe at about 13 or so.
posted by billsaysthis at 02:58 PM on February 01, 2014
I'll admit a pro-European bias here, but Gomez's comments seem wide of the mark:
If he's talking about playing in Turkey or China or something, ok, but if he means that's why players are staying in the MLS, he's nuts. For every Dempsey earning multiple millions, there are a hundred guys earning a salary you could double in the Championship or maybe even League 1. Of course, I just made that assertion with no data to back it up, but you can check MLS salaries here; it looks like the average salary is $150k and the median is $75k. Here's the data for each tier in England through 2010. The average League 1 salary in 2010 was about $120k, so the MLS would be comparable, if we ignore that the average salary in the MLS is incredibly distorted by the top earners. If we assume few players are paid like stars in League 1 (no idea if that's a fair assumption) and use the MLS median as a more accurate "average", then League 1 would be about 1.5x more profitable for a player.
As for the 50% tax thing, can someone clear that up for me? I thought foreign workers weren't subject to direct tax like that or is it that England has a specific rule targeting athletes like some states in the US?
Tangent: I was stunned to hear that Ronaldo's new contract stipulates the team covers all the tax; is that common for superstars? Is it common for all contracts and that's why some leagues are getting crushed by national taxes? I know it was a sticking point with Monaco joining Ligue 1 in France.
Not even tangental: Intel is going to pay Barcelona $25 million to put their logo inside the Barca jerseys for the next 5 years. I feel like there's money to be made in this sport.