Taxes: Ravens’ Flacco moving to Puerto Rico?

Oops.  Got the stories crossed.

It’s John Paulson moving to PR.

Flaaco just signed a contract making him the highest paid NFL player ever.

Well, kinda  … more on that below.

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It’s being reported that hedge fund legend John Paulson is considering leaving New York to go to Puerto Rico, where a tax loophole would let him reduce taxes on the $9.5 billion he has in his own hedge fund.

Bloomberg reports that several wealthy Americans have already taken advantage of the year-old Puerto Rican law that lets new residents pay no local or U.S. federal taxes on capital gains.

Note: The marginal tax rate for affluent New Yorkers can exceed 50 percent.

Back to the Flacco story …

Winning the Super Bowl made Joe Flacco the highest paid player in the NFL.

That’s on a pre-tax basis.

Americans for Tax Reform say that Flacco’s high Maryland tax rate would bump him below Drew Brees in annual NFL contract salary on an after-tax basis.

With the new six-year, $120.6 million contract, Flacco’s marginal tax rate will be 51.98%.

Annually, that would mean Flacco makes $470,000 less than Drew Brees does from his five-year, $100 million deal.

The difference between the two comes from the $1.72 million Flacco will have from Maryland’s state and county burdens.

Brees plays in tax-friendly Louisiana.

For details, see the USA Today report

Moving to Puerto Rico wouldn’t help Flacco.

First, his income is ordinary income – real “Earned” income – not capital gains.

So, the PR loophole wouldn’t apply.

Second, athletes pay taxes, in part, based on the location of  their games.

I don’t think Flacco can convince the Ravens to move to San Juan.

The good news: Warren Buffett says taxes don’t matter.

Tell that to Mrs. Flacco.

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One Response to “Taxes: Ravens’ Flacco moving to Puerto Rico?”

  1. John Carpenter Says:

    This could be an interesting test. PR currently has about a 17% unemployment rate. Pretty bad. Let’s assume a significant number of wealthy folks move to PR and use the capital gains loophole to increase their personal wealth. I wonder if there will be even a small blip on the PR unemployment or any other indicator that the territory is doing better by reducing taxes for wealthy folks. This is the justification PR used when purposely creating the tax break and it sounds a lot like Republican budget arguments today.

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