I have written long ago concerning this topic here,

I think the best possible contract Josh can be expected to receive is a 6 year 150 million dollar deal.

As a general rule people in the highest tax brackets tend to pay about 50% of their real income in taxes when you combine local, state and federal taxes (property taxes, city and state income taxes, federal income taxes, social security and medicare, etc.).

This means that Josh can be expected, if he earns 150 million, to pocket 75 million dollars over the life of the 6 year best case scenario contract.

Previously I have suggested an idea that might make a Hamilton signing possible.

This idea is based on two central premises:

1. The Rangers have no business interest in paying Josh Hamilton 25 million per year

2. Josh and his wife have expressed a strong interest in future philanthropy that seems to overshadow their desire to simply pocket money for their own personal use.

I suggest the Rangers pay Josh 15-17 million per year for 5 years as a base salary.

Additionally, I suggest that Ray Davis, Bob Simpson, and/or the Texas Rangers organization make a donation to the Hamilton Foundation (I don't know what their 501c3 is called) of a total of 5 million dollars per year over the life of the 5 year deal.

The idea behind this is that, Ray Davis and Bob Simpson being the very rich men that they are, already give millions of dollars in tax deductible donations annually. Directing some of their philanthropic activity to the Hamilton Foundation would not cost them anything more than what they are used to spending on charities every year. Bottom line, the Rangers could get Hamilton at a bargain price while Hamilton gets paid handsomely in addition to building his foundation's endowment to fuel his future giving.

Hamilton, for his part, would not pay taxes on the money that would go directly into his foundation's endowment. Of course this money in the future could only be used for charitable purposes.

I calculated the amount of investment money 5 million per year over 5 years would make at an earnings rate of 7 percent per year. If Josh left the money alone for just the first 5 years and let it grow he would have about 31 million in his endowment by the end of the deal.

If the Rangers paid Josh 16 million per year over five years he would pocket about 40 million after taxes.

40 million plus the 31 million that would be in his endowment equals 71 million, only 4 million dollars less than the money that Josh can be expected to pocket after taxes if he receives a best possible 6 year 25 million dollar per year contract. Furthermore, the charitable giving would provide a savings and investment strategy along with a meaningful philanthropic partnership between the Rangers Organization and the Hamilton Foundation.

forgot to include this previous discussion

http://www.bbtia.com/forum/post/1824946

The reason this would never happen is the players union would hate this, MLB would never sign off on this, Josh's agent would lose out on his percentage of that money, and basicly it's just a dumb idea.
Mr. Hamilton is going to be playing for another team next yr get use to it.

Seriously Joe
That is laughable

Joe C.

If one was willing to be creative there are probably ways to work this legally, but I concede it is extremely unlikely since everyone is such a status quo pandsy these days. But everyone being a status quo pandsy doesn't make this a bad idea necessarily.

Screw the agent who makes less, the players association would wine about it that is true, and there are ways to get this through MLB if anyone was interested in thinking on it.

Often times status quo barriers are just illusions that we prefer to better ideas because they are easier and don't make people mad.

Joe, the net after tax money is the same, whether the Rangers pay Josh or a foundation. This occurs because the donations are deductible by Josh as a charitable deduction, and deductible by the Rangers as an ordinary business expense or charitable deduction.

The Rangers (and Marlins, Rays and probably others) offer Josh and the other players some tax advantages. Texas and its political subdivisions do not tax income.

primi timpano,

The money that would be donated to the 501c3 would not be taxed at all under the scenario that I proposed because Hamilton would never receive it as income. When you make a donation to a 501c3 that doesn't mean you don't pay taxes on that income. It may reduce your overall tax burden because it is tax deductible but you still have to pay taxes on it before you make the donation.

I know there is no income tax in Texas, but there is a heavy property tax burden for those who own expensive property. Of course if Josh played in Texas he would pay less taxes in general but his tax burden would still be up near 50 percent of his annual income when you add all taxes together (state, local and federal).

The state of Washington has no income tax and Seattle needs offense in the worst way.

Hello Mariners!!!

Simpson needs to stick to giving his donations to Baylor! We got a new stadium to fund.

As Joe C said, even if this were a great deal that Josh and the Rangers would buy into - which it isn't - the union would never, ever, ever, ever go for this. They want to keep salaries moving up and this wouldn't reflect in such a manner.

And, Marco, taxes aren't typically given much weight in sports contracts because you pay taxes based on where you earn the money. So, 81 of your game checks would have no income tax, but the other 81 are taxed according to the city you're in.

The Players association would never never never accept it!!!

Who really cares what they think. This arrangement would be good for players who care more about giving than they care about lining their pockets with cash. Simply because it doesn't increase the contract doesn't mean that it isn't in the best interest of players who would rather be charitable with their excess wealth instead of buying another 4 mansions that one has to pay ridiculous property taxes on.

Cliff Lee basically told the Players Assoc to shove it so why couldn't Hamilton do the same?

Joe, the cost is the same to the Rangers. The cost is the same to Josh whether he receives the income and donates directly (no tax on donation part of income because of charitable deduction) or if the Rangers contribute (no tax to Rangers because if they have taxable income the contributions are deductible; if no taxable income, then no tax anyway but the deduction can be carried forward). There may be some angle where this would avoid some of the restrictions imposed on on foundation founders and contributors, but those advantages would be marginal.

Your scenario makes no sense. 1/2 of 150m= 75m pay in 5m x 5years this would leave Hamilton 50m but he would also have 25m in tax deductions according to your math this should be good for another 12.5m in over all tax savings meaning if the rangers paid him 25m per year and he paid his foundation 5m per year he would earn 62.5m over the life of the contract and his endowment would be the same as your scenario.

The cost is not the same.

Minor point, but the donation would not be fully deductible. Josh will be in a bracket that phases out a portion of his itemized deductions, and the deduction is limited to 30% of AGI. The first poin is more important than the second.

Additionally, the income to Josh will be deductible (with limitations mentioned above) but payroll tax will apply. Medicare will definitely be paid on this by both the organization and the player. This is a tax that is being increased in 2013 by an additional.9%, a cost shared equally be the team/player on top of the current 4.9% shared by team/player. Beyond that, SS tax may be modified as is currently proposed by the Democrats to impose additional payroll tax on high income earners. This tax currently is only on the first 115k or so of income. Talk is to start it back up at 250k.

So....yeah.

I could be wrong here as I don't know If players are W2 or 1099 income earners. The principles still apply, the lone issue is if the payroll tax is shared or solely owned by the player.

Joe
So screw the union (who is there to help Josh and other players) screw Josh's agent (who is there to help Josh get the best contract). And after Josh does all this screwing of his agent and the players union if he ever has a problem with either his agent or MLB who would help him? because the union and his agent will sit back laugh and say I told you so...
This deal isn't done in a vacume other people are involved and to some extent everyone in MLB present and future and he is going to buck this whole system because you think it's a good idea???

Joe C.

Who would help poor Josh who was in trouble? Lawyers. Lawyers who could also potentially sue a players assoc who chooses to represent only some of its players, the one's who don't piss them off.

If the agent is upset about making less on you... Wow, here's an idea. Get a new agent who will represent your interests instead of their own! They would still get paid millions of dollars...

Oh Joe C. breaking with the status quo really seems to scare you.

There are limits on how much of your income you can deduct as a charitable donation.

apparently certain folks have NEVER had bsiness with the IRS!!! legal or not is irrelvant re this kind of money.. nevr attempt to beat the team that gets to make the rules then change them at will!!!....

Not sure what you were saying but I've surmised that it includes a heavy anti-govt. bias and I am 100% on board with that!

I think the point that was attempted by the OP was that the ownership already makes substantial charitable contributions, and they could just merely shift some of those toward whatever Hamilton charity wanted in lieu of paying Hamilton and Hamilton just donating it. The ownership was going to donate somewhere anyway, so they are saving the higher contract to Hamilton by just changing where they donated to. This would be a good way to see what Hamilton's intentions really were.

There's nothing stupid about creativity like this. Logistically it sounds tough for all the mentioned reasons. From the owner's perspective, I don't think there is a difference in the charitable contributions or payroll expense - they are both tax-deductible, so if they wanted to, they could just cut back on charitable donations to offer a higher salary knowing that Hamilton would be donating a large chunk of his salary. Everyone's happy - union, agent, etc.

joe i am by no means anti anything... to durn old and sick to much give a dang anymore... but after 40 years as a statistical consultant to the IRS (among others), I do know THAT MUCH.. the OWNERS will not allow any type of attempt to circumvent the players paying taxes as is can only cause suspicious eyes to look into more pesonal areas of finances.. sounds silly I know but ..... that the way taxes be..