Some of my libertarian-minded friends have circulated an article written by Cato Institute senior fellow Daniel J. Mitchell, an anti- flat-tax advocate, claiming that Cam Newton will pay a 200% tax to California on his Superbowl earnings. Mitchell quotes "a Certified Public Accountant" writing in a Forbes article at length, ending with this legerdemain:
If the Panthers ... lose [the Superbowl, Newton] will only net another $51,000. The Panthers will have about 206 total duty days during 2016, including the playoffs, preseason, regular season and organized team activities (OTAs)....
Seven of those duty days will be in California for the Super Bowl... To determine what Newton will pay California on his Super Bowl winnings alone ... looking at the seven days Newton will spend in California this week for Super Bowl 50, he will pay the state ... $101,360 on $51,000 should they lose.
Except that's total bullshit. Did anyone else spot the problem with this?
See, Newton didn't earn $51,000 for losing the Superbowl; he earned over $1.1 million for losing the Superbowl. And a $100,000 tax on $1.1 million seems pretty reasonable to me, despite how unreasonable it seems to the Cato Institute (which thinks any tax on income is unreasonable and wants to repeal the 16th Amendment).
If Newton works 206 days in 2016, and 7 of them are in California, then 3.4% of his annual gross income is apportioned to California. But Newton will probably earn $31 million in 2016, not $51,000; and 3.4% of $31 million is, it turns out, $1,053,398.
(Come to think of it, the $51,000 bonus seems kind of small, doesn't it? I mean, since we're talking about fantasy money and not the compensation that most people earn.)
Mitchell's problem isn't that states like California have higher income taxes than other states. His problem is that doesn't want any income taxes, period. Fine; make that argument. But don't foist patently misleading headlines on completely misleading articles and claim you're presenting a real argument.