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Baseball Salaries and Income Taxes: The "Home Field Advantage" of Income Taxes on Free Agent Salaries

James Alm (), William Kaempfer () and Edward Sennoga
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Edward Sennoga: Kampala, Uganda

No 1209, Working Papers from Tulane University, Department of Economics

Abstract: In this paper we examine the impact on the salaries of free agents in Major League Baseball of differences in state and local individual income taxes between major league cities, in an attempt to see if income taxes affect player salaries. Our basic specification suggests that each percentage point of an income tax raises free agent salaries by $21 to $24 thousand; other estimates indicate even larger impacts. Our findings suggest that the existence of this additional salary demand means that low tax cities (e.g., Florida, Texas, and Washington) have a "home field advantage" in the baseball free agent market.

Keywords: Tax incidence; free agents; income tax; luxury tax (search for similar items in EconPapers)
JEL-codes: H22 H24 H31 H73 L83 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2012-07
New Economics Papers: this item is included in nep-pbe and nep-spo
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