Today marks what many consider the beginning of the 2013 NFL Season – the NFL Draft. For many NFL fans, it’s a pseudo holiday. Fans tune in to see who will be the next face of their franchise, families of the athletes have their lives changed, and lifelong dreams come true.
Prior to the new Collective Bargaining Agreement (CBA) that the NFL and NFL Players Association agreed to in 2011, this day also marked the beginning of high-level negotiations between athlete’s representatives and NFL team General Managers. However, with the new CBA it is generally predetermined what a player will make for the first four years of their NFL career. The compensation is based on how high in the draft you are selected. The first pick of the first round could receive around $22,000,000 over 4 years along with a $14,500,000 signing bonus whereas the 32nd pick of that same round will “only” make around $6,500,000 over that same 4 years and will be paid $3,000,000 for their signature on an NFL team contract.
With this new setup it would seem if you represent a prospective athlete that you would want them to be drafted highest overall. While this is generally true, I took the time to calculate what the Net Income salary would be for these athletes after taxes. That is, what is the income they are supposed to receive - federal taxes - agent fees - state taxes? As I mentioned in my previous post, players must pay state taxes in the state they earn their income. With a player playing at least half of their games in the state of the team they are drafted by (two preseason and eight regular season games), if the lower drafted player's state income tax rate is significantly lower than the higher drafted player it is likely the lower drafted player will have a larger net income in the end.
Prior to the new Collective Bargaining Agreement (CBA) that the NFL and NFL Players Association agreed to in 2011, this day also marked the beginning of high-level negotiations between athlete’s representatives and NFL team General Managers. However, with the new CBA it is generally predetermined what a player will make for the first four years of their NFL career. The compensation is based on how high in the draft you are selected. The first pick of the first round could receive around $22,000,000 over 4 years along with a $14,500,000 signing bonus whereas the 32nd pick of that same round will “only” make around $6,500,000 over that same 4 years and will be paid $3,000,000 for their signature on an NFL team contract.
With this new setup it would seem if you represent a prospective athlete that you would want them to be drafted highest overall. While this is generally true, I took the time to calculate what the Net Income salary would be for these athletes after taxes. That is, what is the income they are supposed to receive - federal taxes - agent fees - state taxes? As I mentioned in my previous post, players must pay state taxes in the state they earn their income. With a player playing at least half of their games in the state of the team they are drafted by (two preseason and eight regular season games), if the lower drafted player's state income tax rate is significantly lower than the higher drafted player it is likely the lower drafted player will have a larger net income in the end.
This leaves open the opportunity for athletes to be drafted later than another athlete but make more money than a higher drafted player .
As an example, the New York Jets are drafting 9th in this year’s draft and the Tennessee Titans are drafting 10th. Tennessee exempts NFL players from state income taxes while New York has a state income tax rate of 8.97%. Subtracting state income taxes from these two draft pick’s gross income, the player selected 10th by the Tennessee Titans will actually make more than the player selected 9th from the Jets. ($12,166,660 vs. $12,093,259)
According to the latest mock draft of NFL Network’s Analyst, Daniel Jeremiah, the two players in this situation would be West Virginia’s Wide Receiver Tavon Austin and Alabama’s Cornerback Dee Milliner. Do the advisers representing Mr. Austin try to avoid working out for the Jets and focus on working out with the Titans instead? If Mr. Austin is drafted by the Jets do they try to negotiate a higher salary based off of net income instead of gross income?
In all likelihood, the representatives want to get their players drafted as high as possible but it is food for thought that higher in the draft may not always be better.
Check out the spreadsheet below to see if your team has an advantage or disadvantage based on net income salaries.
According to the latest mock draft of NFL Network’s Analyst, Daniel Jeremiah, the two players in this situation would be West Virginia’s Wide Receiver Tavon Austin and Alabama’s Cornerback Dee Milliner. Do the advisers representing Mr. Austin try to avoid working out for the Jets and focus on working out with the Titans instead? If Mr. Austin is drafted by the Jets do they try to negotiate a higher salary based off of net income instead of gross income?
In all likelihood, the representatives want to get their players drafted as high as possible but it is food for thought that higher in the draft may not always be better.
Check out the spreadsheet below to see if your team has an advantage or disadvantage based on net income salaries.
|
Pick
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 |
Team
Chiefs Jaguars Raiders Eagles Lions Browns Cardinals Bills Jets Titans Chargers Dolphins Jets Panthers Saints Rams Steelers Cowboys Giants Bears Bengals Rams Vikings Colts Vikings Packers Texans Broncos Patriots Falcons 49ers Ravens |
Salary Tax
$776,667 $0 $1,368,059 $652,026 $396,063 $648,159 $330,263 $562,319 $567,851 $0 $758,267 $0 $450,922 $372,174 $282,741 $310,985 $177,157 $0 $374,314 $207,524 $331,479 $285,813 $316,991 $150,426 $306,405 $299,019 $0 $175,518 $189,553 $210,901 $456,857 $236,845 |
Net Income
$21,413,831 $21,201,598 $19,204,251 $19,201,082 $18,198,447 $15,698,853 $14,218,755 $12,188,683 $12,093,259 $12,166,660 $10,644,245 $10,323,698 $9,603,078 $9,232,322 $9,141,971 $8,574,309 $8,528,353 $8,480,758 $7,971,584 $8,093,428 $7,924,527 $7,880,279 $7,759,209 $7,745,968 $7,500,097 $7,417,591 $7,626,696 $7,406,232 $7,031,507 $6,819,133 $6,413,171 $6,530,157 |
Net Inc. Rank
1 2 3 4 5 6 7 8 10 9 11 12 13 14 15 16 17 18 20 19 21 22 23 24 26 27 25 28 29 30 32 31 |
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