Remember those old Ford commercials from 2004? Tagline…“What will Phil do next?” Suddenly, a big question is floating around the sports world and even in the marketing offices of KPMG, Exxon, Barclay’s and others. Pro golfer Phil Mickelson made a bold statement earlier this week regarding the recent tax increases that he will face. Forbes magazine ranked Mickelson the world’s seventh highest-paid athlete in 2012, earning approximately $47.8 million. (Editor’s note: David Bechkam is No. 8 on the same list. Isn’t he a California resident, too? I haven’t heard him take his complaints public.) Due to his California residency and an obvious abundance of money, Lefty’s looking at an effective tax rate of over 60%. Sure it’s easy to roll your eyes in disgust at someone who made close to $50 million last year, but it’s all relative. Does anyone else out there pay more than 50% of your earnings in taxes? You can probably relate to Phil’s frustrations. He does have a few options to consider that may be of relevance to anyone looking to reduce his or her overall tax expense.
The most advantageous option that comes to mind may be easier said than done… pack up the RV. California has been Mickelson’s home for quite some time; he has three children who’ve grown up there and his own parents live close by. California’s state taxes are about to increase to 13.3% for anyone earning over $1 million, so moving to a state like Tennessee, Texas or Florida, with no state income tax, seems like a good idea. Hey Phil, Nashville real estate is on the rebound. As a pro-golfer, Mickelson will pay taxes pretty much anywhere he earns his income, which can include several states depending on tournament locations. Moving to a different state doesn’t necessarily mean Mickelson won’t pay California taxes, but it might mean he will pay less. Local inquiring minds want to know how much of that income did Dublin dip into last year? How about Akron?
Another option is to reduce his earnings. Seems logical; less income, less taxes. However, he’d have to earn quite a bit less for that decision to make sense. Mickelson’s endorsements alone in 2012 were $43 million; that’s 90% of his total income. Whether it makes financial sense to cut back on some of those endorsement deals is something to consider. Retirement? Is that an option? Other players have semi-retired… err, Steve Stricker.
How does this affect the money he pumps into the Phil Mickelson ExxonMobile Teachers Academy? Might that also take a hit as the tax bill goes up?
Mickelson is expected to hold a press conference on Wednesday at Torrey Pines to address his recent statements. For many Americans, including Mickelson, the tax planning decisions that will occur over the next few months are crucial. If you’re in that high tax bracket and faced with a huge tax bill this year, it’s never too late to start planning. Or perhaps, does Phil have a future in lobbying? It’s not out of the question. Maybe this is just the beginning. The list of former professional athletes hanging out on Capitol Hill continues to grow. So does the list of athletes living in Florida.