Remember when Mitt Romney couldn’t shake his image as a hoity-toity rich guy who made too much money and paid too little taxes? Well, now that he’s out of the spotlight the tax-obsessed media has found a new rich guy to tee off on: Phil Mickelson. Like Romney, he’s a wealthy man whose personal taxes have come under public scrutiny. Phil’s problem is the exact opposite of Romney’s though; according to him, he pays too much!
During an interview following his T-37 finish at the Humana Challenge in Palm Springs Fla., Mickelson landed himself in a PR nightmare by bringing up his personal finances. When asked about his future plans and decision not to invest with a group purchasing the San Diego Padres he regretfully stated:
“There are going to be some drastic changes for me because I happen to be in that zone that has been targeted both federally and by the state and, you know, it doesn’t work for me right now… if you add up all the federal and you look at the disability and the unemployment and the Social Security and the state, my tax rate’s 62, 63 percent.”
Mickelson surpassed Tiger Woods last year as the highest paid golfer and second highest paid athlete in the country, making over $60 million through endorsements and winnings and extending his net worth to near $180 million. And while most golfers retreat to low or no tax states like Texas and Florida, Mickelson lives in the least favorable state for high income earners – California. There, voters recently approved Proposition 30, which among other changes increases the tax rate for million dollar earners from 10.3% to a whopping 13.3%. Bad news for guys like Mickelson, but it gets worse: The fiscal cliff aversion deal raised the top income tax bracket from 35 to 39.6%; Obamacare added a 3.8% tax on net investment income, which includes an additional 0.9% Medicare tax for high earners; last, the phase-out of itemized deductions will tack another 1.2% to his bill. That’s a total of 57.9%, just a few ticks away from Mickelson’s estimate and due cause for him to consider “drastic changes,” however, since state taxes can be deducted federal taxes his top rate is probably closer to 50%. He also gives to charity, which could lower his rate even further. There’s also social security, disability, and unemployment taxes which Mickelson mentioned, but those only apply to a small portion of his income and don’t affect his marginal rate.
Even if it was only 50%, that’s twice as high as what most millionaires pay, according to the Tax Foundation. The US tax-code undoubtedly hits wages harder than wealth, which is why Mitt Romney had to foreswear his charitable contribution to raise his tax rate to 14% for appearance’ sake, and Phil is stuck with a clobbering rate:
Romney, with a personal fortune estimated at $250 million (his five kids have another $100 million) has figured this out. When he pays taxes, at all, he does so at the low capital gains rate. Not so with [Phil Mickelson]. He is a wage-earner, albeit a very highly paid one, and he’s going to pay over one-half of his income in taxes if he stays in California. (Edward J. McCafferty – Mickelson has a point on taxes)
Any time a wealthy person, particularly a celebrity or athlete, complains about their finances publicly it’s going to rub someone the wrong way. Mickelson’s comments were regurgitated by the press quickly and launched a debate on how the rich should be taxed. #Mickelson on Twitter is still being pounded with attacks and support for the golfer:
Mickelson has since apologized numerous times for his statements:
“I made a big mistake talking about this stuff publicly, and I shouldn’t have done that. … I think that it was insensitive to talk about it publicly to those people who are not able to find a job, that are struggling paycheck to paycheck.”
Tiger Woods came out in support for his fellow golfer, saying he understands where Mickelson was coming from because he himself moved from California to Florida in 1996 to avoid taxes. Support from one of the world’s most controversial athletes may not have been the best form of PR damage control though. Since his apology, Mickelson is now being criticized for retreating from his comments, which some saw as way to shed light on an unfair tax system. To this Mickelson says, “I shouldn’t take advantage of the forum I have as a professional golfer to try and ignite change.”
Regardless of whether or not Mickelson was justified in his comments, he’s learned a valuable lesson that some things are best kept private. At least he isn’t being asked to reveal 10 years of tax returns, though.
- Tax tip for professional golfer Phil Mickelson: Ask sponsor KPMG for help (dontmesswithtaxes.typepad.com)
- Businesses and Phil Mickelson Consider Bailing On California (2012tax.org)
- Mickelson Calls Tax Comments “Insensitive” (sandiego6.com)
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