In the NFL draft, nothing is more prestigious than being picked first overall.
Bryce Young, selected first overall by the Carolina Panthers on Thursday, has many reasons to celebrate. But the Alabama QB would likely have been able to earn more, after taxes, had he fallen to second.
How so?
Under the NFL’s rookie wage scale, Young will sign a contract that Over the Cap projects to be worth approximately $39.76 million. Ohio State QB C.J. Stroud, picked second overall by the Houston Texans, is expected to sign a deal worth $37.99 million.
With those salaries, Young and Stroud will both pay the highest federal income tax rate (37%) on the portion of their income that exceeds $578,126. (Neither player is married, but if either ties the knot in 2023, the threshold would climb to $693,750.)
Young and Stroud will also both pay payroll taxes, including the Social Security tax, Medicare tax and the Medicare surcharge. And they’ll pay projected athlete-targeted taxes (better known as “jock taxes”) as a visiting player to certain cities and states.
But when it comes to paying their new states, Young and Stroud will have noticeably different experiences. The Panthers play in North Carolina, which imposes a flat 4.75% income tax rate. The Texans play in Texas, which has no income tax. Young stands to pay about $1.81 million in taxes to the state of Carolina, while Stroud won’t owe Texas any taxes on his income.
A portion of Young’s $1.81 million payment to Carolina can be used to offset his taxable income to the I.R.S., assuming he itemizes his expenses (which high-income earners tend to do since their expenses usually exceed the standard deduction). But under the Tax Cuts and Jobs Act of 2017 (TCJA), which was signed into law by then-President Donald Trump, itemizing for state and local taxes and real estate taxes is capped at $10,000. So Young won’t get much of a break with the feds when he pays his new state.
We calculate that as the second overall pick, Stroud will take home $23.7 million post-tax. Young, despite being picked before Stroud, will take home about $500,000 less, $23.2 million.
To be clear, these are projections based on a limited set of publicly available data. Only the players and their accountants know the full picture.
Young, who was raised in California, might still earn more after taxes. His and Stroud’s taxes will be impacted by whether they reside in the state where they play or another state, which might have a different tax rate. Their deductions will also vary. Young, who just partnered on deals with BodyArmor, Jordan Brand and Snickers, and who reportedly earned seven figures in NIL deals, also stands to enjoy greater endorsement opportunities as the player picked first.
But the combination of a slotted rookie wage scale, different state income tax rates and federal itemizing limitations can lead to peculiar outcomes.
To date, no major sports league has negotiated a wage scale, or salary cap/luxury tax threshold, that considers the impact of state income tax rates.
Kurt Badenhausen contributed to this report.
