A staggering $300 million is definitely more than enough money to set someone up for life many times over. But it’s still worth speculating whether baseballer Manny Machado knew he could’ve gotten more from the deal the Chicago White Sox offered him than the one he just signed with the San Diego Padres.
After crunching the numbers and looking at the aspects of the decision, here’s why.
A Bigger Total Payout Over Time
Some sports commentators attributed the White Sox’ failure to sign Machado due to their less than stellar performance in baseball leagues.
According to Machado, he left the Los Angeles Dodgers because the team was based in the west coast of the United States. So, it really surprised baseball fans when he chose to join a team on the same coast just 120 miles south.
Some speculate that the decision was due to the larger offer made by the Padres. Money does talk, sometimes. But after some comparisons to the offers he got, it’s still a mystery why he chose the Padres over the White Sox.
See, the Padres offered Machado a guaranteed $300 million for a ten-year contract while the White Sox offer guaranteed him $250 million for eight years. But here’s the catch, the latter offered him performance bonuses that could easily raise his salary to around $320 million.
Besides, when looking at annual salaries, the White Sox guaranteed the sportsman a million more than his current team. And that’s not even considering performance bonuses.
The Issue of the California Income Tax
Machado currently plays for the San Diego Padres, a team based in San Diego, California.
There’s also the issue of state income taxes.
The Dominican-American player currently cites Florida, a state with no income tax, as his home.
However, playing for the Padres makes him a part-time California resident and may even require him to live there during baseball season.
California is one of the 43 (out of 50) states which has an income tax at 13.3 %. What more, professional athletes like Machado are subjected to pay for “jock” tax meaning they would have to pay the income tax in the states that they play their matches in whether they’re a resident or not.
Going by estimates, Machado will likely incur around $27.65 million in California state income taxes over the 10 years he’ll spend playing for the Padres.
Speculating On What Could’ve Been
Machado’s decision not to sign with the White Sox surprised the team’s executives given their very good offer.
But what if he chose to play for the White Sox instead?
For starters, the state of Illinois has a much lower income tax of 4.95%. Assuming the sportsman have earned all of his bonuses and incentives, his total Illinois income tax would be right around $10.15 million. That’s more than half of what he’s about to pay in taxes living in California.
After further computations noting the other advantages of the White Sox offer, it appears that Machado could actually be foregoing a sum total of $37.6 million playing for the Padres.
In the end, that loss estimate might not even matter to Machado if he can play to help bring the Padres to the championships.