We knew about the elimination in deductions for donations, but the excise tax is going to cost schools like Arkansas a lot of additional money - in excess of $1 million each year.
The tax charges non-profits 21 percent of the salary for the top five university earners who are paid more than $1 million. Athletic departments operate as non-profit organizations.
Currently, the only two UA employees who are above that threshold are Chad Morris and Mike Anderson. Hunter Yurachek’s annual salary is $850,000, but Jeff Long’s was in excess of $1 million.
Before bonuses, Morris is guaranteed $3.5 million each year, of which a 21 percent tax would cost $735,000. I’m unsure whether the bonuses would be calculated into the taxable amount, but Morris is eligible for up to $1.2 million in bonuses each year. If Yurachek has a bonus schedule similar to Long’s, then he could exceed the $1 million threshold.
Anderson’s annual salary is $2,250,800, of which a 21 percent tax would cost just under $472,700.
It is also worth noting that Arkansas could pay one of its football coordinators in excess of $1 million in the near future.
The other thing to note is the tax that will be placed on buyout payments. Arkansas is on the hook right now for eight figures worth of total buyout payments related to the football/AD change, including more than $1 million each year for Long and Bret Bielema.
With the standard deduction being essentially doubled, the elimination of many deductions is moot for most taxpayers. The number who itemize will go down dramatically. Now it is up to the states to follow suit and also raise standard deduction rates. As far as the excise tax goes, I have little concern on a personal level for the “problems” of multimillionaires, but that’s the market, so good for them. The institutions will deal with the new realities.
I have a feeling this will trickle down to the fans at some point in the form of higher ticket prices to cover the higher costs of doing business. The TV revenues might be able to cover the cost at some places, but not all.
The schools will have to get their budgets in order unless the arms race for coaches and facilitates slows down. It is going to come down to the supporters and boosters at each school to prop up this uncontrollable juggernauts.
What is overlooked is how this tax bill will hit future students on being able to get an education. If the percentage of students going to college begins to drop due to the lack of financial options then this will trickle down to the contribution of to many major sports programs as the size of the alumni will shrink overtime. Trickle down works in negative ways also.
The excise tax will be paid by the non-profit organization, not the “multimillionaires.” At some point, the UofA and other universities will no doubt pass the cost of that tax down to the fans, most of whom are something less than millionaires, multi or otherwise.
Fans aren’t helping any with their demands, but schools can’t spend money they don’t have. A lot of that comes from the boosters (who demand wins for their bucks), but it also includes the TV megamillions. Which eventually comes from the fans as well, as we pay for our cable bills or internet provider or however we consume that content.
I was just thinking about the early days of ESPN when they resorted to heavy doses of Aussie rules football and other bizarre sports because they had trouble filling 168 hours a week. It was college basketball and not much else. My, how things have changed.