| dc.description.abstract | This paper examines the relationship between state income tax rates and Major League Baseball (MLB) free agent salaries. Previous research in this area finds that teams located in states with a higher tax rate pay their players higher salaries. This may put teams in high income tax states at a disadvantage when bidding for free agents against teams in low or no income tax states, as players and their agents consider net-of-tax salary offers. This paper expands on previous research by evaluating whether a similar relationship exists between state income tax rates and bonuses. This paper also differs from prior research by using the sabermetric statistic wins above replacement (WAR) to represent a player's prior levels of performance in the regression models. Prior research uses combinations of traditional statistics such as on-base percentage, batting average, and fielding percentage. This paper's findings are consistent with those of previous studies as state tax rate is a significant variable in the regression analysis for salaries. This paper's results also provide evidence that WAR is a significant explanatory variable in the salary regression. No variables were significant in the regression analysis for bonuses, perhaps because of the small sample size. This paper details the free agency process, the types of bonuses awarded to MLB players, the effects of state taxation on the salaries of professional athletes, the quantitative analysis, and the implications of the analysis results. | |
