The Bryce Harper Tax Relief Act of 2017
Bryce Harper
If  superstar Bryce Harper  were to sign a 10-year contract with the Nationals  as many in Washington hope  he  does   he 'd be hugely wealthy -- and would benefit greatly from the Republicans' proposed tax cut bill. (John McDonnell/The Washington Post)
To fully appreciate how skewed the impact of the Republican tax bill would be  consider what it could mean for  baseball superstar Bryce Harper  if  he  were to sign a 10-contract with the Washington Nationals  as many of us in Washington are hoping.
The Nats  known for making creative deals with players  might agree to pay the right-fielder an annual salary of $30 million  which sounds like a lot  but actually isnât for a franchise player with the star power of  Harper . So to reflect that star power  letâs assume the team would pay  Harper  another $20 annually for use of what tax practitioners would call his âintellectual propertyâ â his name  his face  his reputation â in the form of royalties that the team would earn from its TV contracts and sales of paraphernalia to fans. Add to that $10 million in royalties a year that  Harper  could probably earn independently from product and other endorsements.
So you add it all up and  Harper  would have an annual income of $60 million split evenly between salary and royalties. Figure his $30 million salary would be taxed as ordinary income at 48 percent  combining both federal and Virginia state tax. That would leave him with an after-tax salary income of $15.6 million. Now letâs figure he sets aside $2.5 million to live like a young sports star might live  and invests the balance  roughly $13 million  in an S&P stock index fund.
In other words  he sells the stream of royalties from his intellectual property to a partnership in which he himself then becomes a partner. The partnership  in turn  allocates to  Harper  each year  his  pro rata share of its profit  which for tax purposes flows through to  his  personal income. Under the Republican bill  this partnership income would be taxed at an effective rate of 31 percent  for federal and Virginia.
Assuming historical rate of return on the salary income invested in the stock index fund  and a somewhat higher rate of return on his investment partnership  under the bill passed by the House of Representatives   Harper  would wind up at the end of the 10-year contract with combined individual and partnership assets worth about $560 million.
If  superstar Bryce Harper  were to sign a 10-year contract with the Nationals  as many in Washington hope  he  does   he 'd be hugely wealthy -- and would benefit greatly from the Republicans' proposed tax cut bill. (John McDonnell/The Washington Post)
To fully appreciate how skewed the impact of the Republican tax bill would be  consider what it could mean for   [TGT] if  [TGT]  [TGT]   were to sign a 10-contract with the Washington Nationals  as many of us in Washington are hoping.
The Nats  known for making creative deals with players  might agree to pay the right-fielder an annual salary of $30 million  which sounds like a lot  but actually isnât for a franchise player with the star power of  [TGT]  . So to reflect that star power  letâs assume the team would pay   [TGT] another $20 annually for use of what tax practitioners would call  [TGT]  âintellectual propertyâ â  [TGT]  name   [TGT]  face   [TGT]  reputation â in the form of royalties that the team would earn from its TV contracts and sales of paraphernalia to fans. Add to that $10 million in royalties a year that   [TGT] could probably earn independently from product and other endorsements.
So you add it all up and   [TGT] would have an annual income of $60 million split evenly between salary and royalties. Figure  [TGT]  $30 million salary would be taxed as ordinary income at 48 percent  combining both federal and Virginia state tax. That would leave  [TGT]  with an after-tax salary income of $15.6 million. Now letâs figure he sets aside $2.5 million to live like a young sports star might live  and invests the balance  roughly $13 million  in an S&P stock index fund.
In other words  he sells the stream of royalties from his intellectual property to a partnership in which he himself then becomes a partner. The partnership  in turn  allocates to  Harper  each year  his  pro rata share of its profit  which for tax purposes flows through to  his  personal income. Under the Republican bill  this partnership income would be taxed at an effective rate of 31 percent  for federal and Virginia.
Assuming historical rate of return on the salary income invested in the stock index fund  and a somewhat higher rate of return on his investment partnership  under the bill passed by the House of Representatives   Harper  would wind up at the end of the 10-year contract with combined individual and partnership assets worth about $560 million.