The city of Cleveland taxes NFL players who earn paychecks by playing games on the shores of Lake Erie, but now it appears their methods are under fire. The Indiana Business Journal reports that former Colts center Jeff Saturday has filed suit against the city of Cleveland for their taxation procedures.
At issue is exactly when NFL contract dollars are earned. If a player makes $10 million dollars for a year of football, are they paid that money based on the number of workdays in their season or the number of games? The way the city of Cleveland figures it, a player on a $10 million deal is paid $625,000 per game, so when that player plays a game in Cleveland his taxable income is that whole $625,000.
The way Jeff Saturday figures it, he’s working 200 days a year as a part of being a pro NFL player. That means that he’s paid $50,000 per day of the NFL work year. If he gets to Cleveland on a Friday and leaves on a Sunday, his taxable income in the city is drastically lowered to $150,000. For the city, their revenue is drastically lower as well.
In my example, the city would get $3000 instead of $12,500 in tax revenue on a $10 million player.
One much easier issue to settle might be Jeff Saturday’s claim that he shouldn’t owe anything for a particular Colts game from 2008 when he wasn’t even in the city due to injury.
This is an interesting case. It also drastically changes the cost / benefit proposition of the entire relationship that the city has with the Cleveland Browns. If the law calls into question the very baseline methodology that determines city revenue, it fundamentally changes the landscape with which the city entered into many agreements in terms of costs.