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New Blue Jays face tax hit
Those players could take a significant financial hit moving from Florida, a state with no income tax, to Canada, a country where their tax rate will reach 47.97 percent between provincial and federal requirements, according to Forbes.com.
Retired first baseman Carlos Delgado could have faced the same issue when the Marlins traded him to the New York Mets seven years ago. But his agent, David Sloane, already had found a solution.
The Marlins had refused to grant Delgado a no-trade clause when they signed him to a four-year, $52 million free-agent contract on Jan. 26, 2005 — a stance that foreshadowed their positions last off-season with free-agent shortstop Jose Reyes, left-hander Mark Buehrle and closer Heath Bell, all of whom have since been traded.
Sloane, trying to protect Delgado, negotiated a different form of security into the player’s contract — a clause that required any team that acquired Delgado to pay him the amount of the income tax that he would be charged by his new state.
The clause would not have applied if the Marlins had traded Delgado to a team in another state without income tax — say, the Texas Rangers. But when the Marlins sent Delgado to the Mets 11 months after signing him — sound familiar? — the first baseman was covered.
Sloane said that Delgado saved $2,269,500 million in taxes over the rest of his contract. At the time of the trade, he still was owed $39 million over three years, and the Mets later exercised a $12 million club option to keep him through 2009.
“When the Marlins refused to include a no-trade clause, that raised a red flag for me,” Sloane said. “I set out to try to find a way to give my client a bit of security in a deal that lacked it.
“The way to do that was by insisting that, if he was traded to a state with state income tax, that he would be made whole and net out the same amount that he would have if he had remained in Florida.”
It is not known whether any of the five players going to the Jays negotiated a similar clause in their contracts; none of their agents responded to a question on the matter Thursday.
Four of the five were under multiyear contracts. Right-hander Josh Johnson signed an extension in January 2010. Catcher John Buck agreed to a free-agent deal in November 2010, Reyes and Buehrle to free-agent deals last December.
Johnson will earn $13.75 million in ‘13, Buehrle $11 million and Reyes $10 million. Each then would owe nearly $600,000 in Canadian taxes, according to Forbes. Buck, earning $6 million, would owe probably about half that, and Bonifacio, projected to earn about $2.5 million in arbitration, considerably less.
For Johnson and Buck, the tax hit would be a one-time thing; both are free agents at the end of the season. Buehrle, however, is guaranteed $52 million through ’15, including a $4 million signing bonus that was deferred. Reyes is guaranteed $96 million through ’17, including a $4 million buyout on a club option. Bonifacio is under club control through arbitration for two more years.