NFL playoffs: Do state taxes affect your team's chances of winning?

The NFL divisional round playoffs kick off this weekend and if your team didn’t make the cut, you may want to blame its home state’s tax rates.

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According to a paper by Matthias Petutschnig of the Vienna University of Economics and Business, there is a “significant negative relation” between an NFL team’s success and the income tax rates in the state that the franchise is located in.

Over a 22-year sample period, teams in high-tax states won an average of 0.2 games less per each percentage point of tax differential every season, Petutschnig concluded.

“A team from California (highest average tax rate) wins 2.75 games less per year than a team located in a no-tax state such as Florida or Texas,” he wrote.

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The main reason is that NFL players are highly paid, highly mobile and have strong incentives to consider the tax implications of the teams they choose to play for, according to the analysis.

The paper’s primary goal is to study how personal income tax rates influence the success of teams, taking into account the league salary cap. Petutschnig ultimately concluded that it was the interaction of the salary cap with the tax rate differential that swayed a team’s prospects for success.

For example, when top-tier talent negotiates with a team in a high-tax state, the player may ask for more money to offset what he will lose in personal income taxes, the researcher wrote. However, a team may not be able to meet those demands under the strict salary cap requirements.

“This reduces the average talent level of the whole roster of a team in a high tax state and diminishes its chances of winning,” Petutschnig said.

One exception is the New England Patriots, a franchise located in a high-tax state, Massachusetts, but also the most successful from 1994-2016, the observed time period.

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The teams that will square off this weekend include a few from states with no income taxes, like the Houston Texans (of Texas) and the Seattle Seahawks (of Washington). The Tennessee Titans are based in a state that doesn’t tax wages, but does currently tax dividends and interest.

The California-based San Francisco 49ers buck the trend this year. The Golden State is home to the highest income tax rates in the country, which can top 13 percent.

In Maryland, which is home to the Baltimore Ravens, tax rates are relatively low. They range from 2 percent to about 5.75 percent. Missouri's rates are also low. The home to the Kansas City Chiefs has income tax rates that generally range from 1.5 percent to 5.4 percent.

In Wisconsin, where the Green Bay Packers are based, rates vary from 3.86 percent to 7.65 percent.

Taxes are higher in the Vikings’ home state of Minnesota, climbing up to 9.85 percent.

However, as previously reported by FOX Business, teams don’t just pay taxes in the states where they are based.

They are also subject to taxes in other states where they play and earn income. Those "jock taxes" are usually calculated by dividing the number of work days spent (practices and games) in the city by the total number of work days, but some states just use games played. It's not a double tax, however. Players pay taxes equal to the highest rate in either their resident or non-resident state. They get credit for the taxes in the lower-tax state.

But even taking jock taxes into account, the difference in tax liabilities can be stark between states. For example, last year, NBA star Steph Curry of the California-based Golden State Warriors’ gross wages were $37.5 million. However, his net wages after taxes were $17,751,150.

On the flip side, Chris Paul, who was on the Texas-based Houston Rockets, had gross wages valued at $35.7 million and he took home $20,772,300 after taxes. Paul has since moved on to play for the Oklahoma City Thunder.

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