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Fresh off the course at the Humana Challenge golf tournament this weekend, Phil Mickelson told reporters that recent tax hikes on the rich might force him to make "drastic changes," suggesting he'd be leaving either golf or his home in California.
At the center of Mickelson's tax complaint was his claim that he pays a tax rate of 62 to 63 percent.
"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 said. "So I've got to make some decisions on what I'm going to do."
Related:?Did California's Rich Tax Really Shrink Its Deficit?
There is no doubt that Mickelson's taxes are high. And they just went up by an additional 7.9 percent over the past three months due to the "fiscal cliff" deal and California's Proposition 30.
But several accountants interviewed said it's unlikely that Mickelson is actually paying a rate above 60 percent. With even the most basic tax planning, they said, his real rate is most likely closer to 50 percent.
After his comments turned into a rare off-course controversy for Mickelson, he apologized but didn't back away from his numbers. "Finances and taxes are a personal matter and I should not have made my opinions on them public," he said today in a statement. "I apologize to those I have upset or insulted and assure you I intend to not let it happen again."
But let's consider those numbers.
Under current tax rates, Mickelson would pay 13.3 percent in state income tax and 39.6 percent in federal income tax. That's 52.9 percent combined. Medicare and Medicaid is an additional 2 percent. The new health-care levy is .9 percent on earned income and 3.8 percent on investment income.
Self-employment taxes could total an additional 15.3 percent -- but that's only on income up to $113,000, accountants say. After that the rate is 2.9 percent.
Mickelson would also pay local taxes where he plays tournaments. That could add another one percent or two percent.
So the maximum Mickelson could pay in state and income taxes, payroll and other income-related taxes would be around 60 percent.
But that rate is only if he did absolutely no tax planning or basic deductions. He would, for instance, get a deduction on his state income taxes from his federal. He would also deduct any golf-related expenses as a business expense. He probably puts money in a retirement plan, which is tax-favorable.
I would guess that Mickelson has some investments, which would be taxed at the lower capital gains rate of 20 percent (or 23.8 percent with the new health-care tax). And I would guess he might have a mortgage deduction, or other deductions related to kids and education.
And we know that Mickelson gives money to charity. So that would be deducted as well. If he has trusts (which he likely does) that also reduces his tax rate.
Related:?Tax Hikes on Rich May Increase Charitable Giving
Steven Piascik, president of Piascik ? the accounting firm that works with dozens of professional athletes ? said that he easily could bring Mickelson's rate to around 50 to 52 percent with some "basic tax planning."
"I couldn't guarantee it, but 8 to 10 percent off that 62 percent rate seems normal," he said. "I would guess he's doing a lot of these things already."
Either Mickelson misspoke ? or he needs to hire a new accountant.
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Source: http://www.nbcnews.com/business/mickelson-likely-pays-less-taxes-he-thinks-1B8057229
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