Mickelson apologized the next day for offending anyone by implying that higher taxes would affect his lifestyle, but he didn’t really take back the substance of his remarks. He simply called finances and taxes a personal matter that he shouldn’t have discussed in public.
What has Mickelson upset? California voters recently approved the first statewide tax increase since 2004. Proposition 30’s rate increases vary from 1 to 3 percent on those earning over $250,000. The new law will also increase the sales tax a quarter-cent for the next for four years. California’s tax changes coincide with an increase in federal tax rates on upper-income taxpayers. The fiscal cliff compromise allowed the top federal rate to rise from 35 percent to 39.6 percent.
The combination of those two events was devastating to a hardworking millionaire golfer like Mickelson. “If you add up all the federal and you look at the disability and the unemployment and the Social Security and the state, my tax rate's 62, 63 percent,” Mickelson said. "So I've got to make some decisions on what I'm going to do.” He also said that the tax increases already caused him to back out of a bid to buy the San Diego Padres. Apparently he concluded that owning a Major League Baseball team just can’t be profitable because of a temporary 3 percent rise in California’s top tax rates.
Mickelson has earned over $73 million during his golf career from tournaments alone. His endorsements total $40 million a year. Even if he is paying a 60 percent tax rate, that would leave him $16 million a year in income, just from his corporate partners such as Callaway, Rolex, and Exxon Mobil. One of Mickelson’s most prominent sponsors is KPMG, which perhaps should be taking a closer look at the golfer’s tax returns if he is indeed paying a 60 percent effective rate (something that is highly unlikely).
Syracuse professor and TPC founder Len Burman, in a post on Forbes.com, agrees that Mickelson is almost certainly wrong about his tax rate. He calculates that Mickelson’s likely tax rate is around 52 percent -- somewhat high, perhaps, but nowhere near enough to make him reconsider his entire career. Burman calls on Mickelson to “please stop whining and give thanks for being able to earn a fabulous living.”
Many economists and conservatives have called California’s tax increase a self-defeating proposition, pointing out that the rich can simply move out of the state to avoid the excessive rates. That is true (and many upper-income Californians have done just that over the years, contributing to the state’s trend toward becoming a very blue state at all levels). California legislators seemed to anticipate that by making the tax increase effective on 2012 income, so as to capture as much of the estimated $6 billion a year as possible before the wealthy, like Mickelson, simply pack up and move. But the complaints of one of the richest athletes in the world don't do antitax crusaders much good. In fact, it probably hurts their position with the public (much like Mitt Romney’s effective tax rate probably hurt the GOP nationally). If Mickelson wants to make poor business decisions (like deciding against owning a lucrative MLB team) and lifestyle changes (moving to Florida or Canada) based on an uptick in California and federal tax rates, that is his choice. But as he admitted the day after his remarks, he probably should keep the grumbling to himself.