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

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Author Info

  • James Alm

    ()
    (Department of Economics, Tulane University)

  • William H. Kaempfer

    ()
    (Department of Economics, University of Colorado at Boulder)

  • Edward Batte Sennoga

    (Kampala, Uganda)

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.

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File URL: http://econ.tulane.edu/RePEc/pdf/tul1209.pdf
File Function: First Version, 2012
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Bibliographic Info

Paper provided by Tulane University, Department of Economics in its series Working Papers with number 1209.

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Length: 24 pages
Date of creation: Jul 2012
Date of revision:
Handle: RePEc:tul:wpaper:1209

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Keywords: Tax incidence; free agents; income tax; luxury tax;

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  1. J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers 185, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Jon Bakija & Joel Slemrod, 2004. "Do the Rich Flee from High State Taxes? Evidence from Federal Estate Tax Returns," Department of Economics Working Papers 2004-12, Department of Economics, Williams College.
  3. Austan Goolsbee, 1997. "What Happens When You Tax the Rich? Evidence from Executive Compensation," NBER Working Papers 6333, National Bureau of Economic Research, Inc.
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