Opinion

Chargers QB Philip Rivers has Abruptly and Permanently Moved from California to Florida. Did State Taxes Play a Role?

Written by Richard Rider, Chairman of San Diego Tax Fighters

Philip Rivers, the longtime starting quarterback for the Los Angeles Chargers, reportedly packed up his family and belongings and moved to Florida. He announced it was a permanent move—he and his large family (wife and nine kids) have left the building.

Why did he move? We’ll get to that shortly.

Rivers is now an NFL free agent. The move does not seem to be related to where (or if) he will play next season. Personally, I’m hoping that he retires from active play. I’ve always liked Rivers from afar—perhaps it’s his top quality work ethic. It’s astonishing that he hasn’t missed a start since he took over from departing quarterback Drew Brees in 2006. He’s second in NFL history in consecutive quarterback starts behind Brett Favre, whom he’s unlikely to pass.

Rivers’ time as a football star has passed. Today’s quarterbacks have to be more mobile, and Rivers is perhaps the NFL’s most immobile quarterback. His only competition for that dubious honor? Ben Roethlisberger. I give the nod to Rivers in this contest.

But I digress. Let’s get back to why Rivers moved to income tax-free Florida. He says that he moved to be closer to him and his wife’s family, in Alabama. And no doubt that is true.

It’s worth noting that even though his relatives and childhood friends are in Alabama, the Rivers family is moving to Florida. Perhaps the Alabama five percent state income tax rate played a part in that decision. What Rivers doesn’t mention is his new state’s zero income tax advantage. Smart man.

The net worth of Philip Rivers is estimated to be about $80 million. Assume for a moment that he makes $20 million a year in salary and capital gains from this net worth. If he stayed in California, the amount he makes in income and capital gains in excess of $1 million would be taxed at 13.3% by our rapacious Golden State. The total annual California income tax bill would likely be around $3 million. In Florida, it’s zero.

If he has built up capital gains over the years, it’s likely that he has delayed sales until after departing from California. Moreover, if he has deferred compensation built up, that income might also avoid California taxation.

But wait, there’s more! While Rivers’ playing days may be over, he’ll likely continue to work. He may coach football, become a commentator, or pursue any number of opportunities. But given his work ethic, it does seem that he’ll continue to work in some capacity.

And then there are endorsements. I doubt he’s much of a draw in that role, but he could certainly pick up a few hundred thousand a year. With a good marketing agent, perhaps significantly more.

His new job would hopefully be outside of California, which lowers his state income taxes on that revenue. His endorsement revenue will be taxed solely based on his new state of residence: Florida.

Interestingly, Philip Rivers owes a profound debt of gratitude to professional golfer Phil Mickelson. Years ago, Mickelson (a fellow San Diego County resident) “took one for the team.” In a casual press conference, Mickelson mentioned in passing that he was thinking about leaving California for Florida in large part because of the difference in state income taxes.

All hell broke loose. The left-wing media went bonkers, castigating him for his “greed” and “selfishness.” Many middle class duffers who looked up to Mickelson were incensed. His many lucrative endorsement deals were in jeopardy. Mickelson belatedly changed course, and to this day he and his family are still stuck in high tax California.

This adverse publicity was and is particularly important for Mickelson as he has made most of his money from endorsements, not from golf purses. At one point, it was estimated that he made about $5 million annually from tournaments, and perhaps $60 million from endorsements. Like Arnold Palmer and other top golfers, endorsements were the key to huge wealth.

What was the “Mickelson lesson” to be learned by sports stars and entertainers in general? The lesson was not that one must stay in a high tax state. The lesson was this: never tell anyone that you are moving to save on taxes.

Consider Tiger Woods. Only a couple weeks before he signed a multi-million dollar endorsement contract with Nike, Woods moved from California to Florida. He did not mention taxes as a factor, and there was zero bad publicity for him.

By the way, Most PGA golf stars move to Florida when they are becoming successful. When it comes to the game of golf, San Diego is a far superior place to live compared to Florida. Almost no rain, mild year-round weather, no bugs (especially no mosquitoes), low humidity, little wind, and fewer alligators on the golf courses!

Our state’s only major drawback for such rich folks is our 13.3% state income tax. But that’s enough to cause golfers and tennis stars (athletes who are not attached to a sports team) to migrate to Florida. When Venus and Serena Williams started to shine in tennis, they quietly moved from California to Florida. No fuss resulted.

But back to Rivers. We don’t know if taxes figured in Phillip Rivers’ decision to uproot his family (a family that lived in San Diego County for 15 years) and move them to hot, muggy, rainy, flood-prone, hurricane-ravaged, alligator-infested Florida. And if he’s half as smart as I think he is, we never will know. Never, that is, until perhaps after he ends his days in the entertainment world and no longer profits from the endorsement markets.

Fortunately, the good news in California is that our state government has a gigantic budget surplus—and the best shifty-eyed accountants that money can buy. We don’t need rich people’s filthy lucre. Money grows on trees in our Golden State, after all.

 

Photo by Brook Ward via Flickr