By Alex Halverson
The Seattle Times
(TNS)
Seattle’s pro sports teams enjoy a competitive advantage over clubs from big, rich cities like New York and Los Angeles. Their players paid no state income tax, at least at home.
The new “millionaires tax” on high-income Washington residents complicates the picture for the front offices and ownership groups of teams like the Seahawks. If implemented as planned in 2028, Washington’s high-earners—including plenty of pro athletes—would face a 9.9% levy on any income over $1 million.
Some of the more vocal opponents of the tax have been those in the city’s tech industry, arguing that it will disincentivize would-be founders from picking Seattle to launch their startups. They’ve also said it would give existing businesses a reason to relocate, to protect their C-suites.
The income of many professional athletes will fall above that threshold as well. Visiting players will be affected too, as part of what’s called the “jock tax,” as athletes are taxed in the states where they play.
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The tax looms over the conversations among Seattle’s sporting class.
During a recent networking event with local sports lawyers, the topic of the “millionaires tax” kept coming up, said John Wilson, a partner at K&L Gates who focuses on tech transactions and sports law.
“The main takeaway from those conversation and others that I’m having with my clients is that this is just adding a new layer of uncertainty and complexity that everyone is trying to wrap their minds around,” Wilson said.
As the tax wound its way through the Legislature in March, Seahawks general manager John Schneider added more fuel to the fire. During a weekly radio appearance on Seattle Sports 710 in mid-March, Schneider said the tax could hinder the team’s competitive advantage in recruiting free agents. He followed up those comments a few weeks later during a meeting with reporters by reiterating his view that the tax could hurt the team.
“It’s going to affect all the sports teams, for sure,” Schneider said at the time.
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The subject of free agency and athlete compensation is top of mind for Seattle sports fans, as the Seahawks come off a Super Bowl championship and the Mariners look to repeat playoff success from last year. Star players like Seahawks wide receiver Jaxon Smith-Njigba and Mariners catcher Cal Raleigh received hefty contract extensions. And, fingers crossed, as success continues, more players will be up for extensions and retention in the coming years.
Wilson referenced Schneider’s comments, saying the tax risks the competitiveness of Seattle’s teams.
“Washington has historically punched above its weight in free agency for its market size, relative to Los Angeles and New York,” Wilson said. “In part, that’s just been because of the tax environment.”
The logic behind that advantage seems sound.
Because teams in the NFL are under a salary cap—a limit on how much money a team can spend on the total roster in a given year—the promise to a free agent that their income won’t be taxed allows a team to theoretically pay less than one in a state with an income tax.
The lack of an income tax isn’t the be-all and end-all. The Los Angeles Dodgers are defending back-to-back World Series champions and California has a progressive income tax rate. And in the NFL, the only teams from states without an income tax to win a Super Bowl in the past 20 years are the Seahawks and the Tampa Bay Buccaneers.
But overall competitiveness may have a causal relationship with an income tax, according to a study published by the University of Illinois at Chicago in 2021.
While theorizing whether higher state income taxes placed a higher burden on firms and organizations over individuals, the author of the study, former University of Illinois at Chicago professor Erik Hembre, tested the relationship with sports teams.
As state income taxes increased, the winning percentages of sports teams decreased, Hembre told The Seattle Times. His study found that for each percentage point increase in state income tax rates, professional sports team winning percentage declined by 0.7 percentage points.
Hembre, who’s now a senior economist at the Federal Reserve Bank of Minneapolis, said the exact shift could be slightly skewed by a relatively small sampling size but he’s confident in the overall downward trend in the data.
Can a team still win when an income tax increases?
Despite the headline trend in his data, Hembre said he wouldn’t want the takeaway from his paper to be that a team can’t win with high tax rates in their state.
“There are a number of things that affect whether players want to live in and work in your city, like the weather and nightlife,” Hembre said. “Those definitely matter, just like tax rates would. So you get great teams like the Dodgers, Yankees, Warriors and Lakers, all teams that have won championships and living in areas that have high tax rates.”
The more direct advantage of lower tax rates over time are likely for smaller markets. He points to the San Antonio Spurs, a basketball team in Texas that has enjoyed decades of success in a state with no income tax. On the flip side, a high tax rate might hurt a team like the Sacramento Kings, which has only made the playoffs once in the past 20 years.
Seattle isn’t a small city, but it doesn’t rank among the top metro areas like New York, Los Angeles and Chicago. The Seattle metro area is the 15th largest in the country, according to the Census Bureau.
Athlete contracts are a complex mix of base salaries, signing bonuses and other incentives. And those differ across the major sports leagues as some front offices have to navigate salary caps while others don’t. The NFL has a hard salary cap, which requires teams to stay under a certain limit, while the NBA has a softer salary cap that financially penalizes teams for going over. The MLB has no salary cap, which allows for rich teams to build out their rosters with superstars, as long as ownership is willing to pay for it.
Some sports leagues, like the NHL and WNBA, have lower minimum salaries which may allow athletes to dodge a high-earners income tax. But as the popularity of those leagues and their stars continues to swing up, the lucrative brand deals they sign would put their total income over the threshold.
If the tax is implemented, Wilson, the K&L Gates attorney, expects the norm of athlete contracts in Washington to change. Successful teams in California, like the Dodgers, have been able to build around star players like Shohei Ohtani by getting creative with how players are compensated.
“I fully expect to see new deals or even restructured deals that will take into account things like signing bonuses, deferred compensation and other sorts of payment mechanisms that are designed to minimize athletes’ income exposure.
Photo caption: Seattle Seahawks general manager John Schneider speaks to the media on July 30, 2025. (Seahawks Press Pass/YouTube)
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© 2026 The Seattle Times. Visit www.seattletimes.com. Distributed by Tribune Content Agency LLC.
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