Sports Stars Are Paid Too Much Essay Scholarships

College basketball is going to be dominating winter sports until the NCAA’s March Madness championships finally end in April. Meanwhile, between games there’s another contest taking place: debates about whether colleges should pay athletes in two big-time sports—football and men’s basketball. This replaces 1980s television beer commercials pitting “tastes great” versus “less filling” factions among sports fans.

So, to start the “play for pay” games, let’s assume that salaries replace scholarships in big-time men’s college sports. What happens, for example, to the college player if he were paid $100,000 per year?

A full athletic scholarship (a “grant-in-aid”) at an NCAA Division I university is about $65,000 if you enroll at a college with high tuition. This includes such private colleges as Stanford, Duke, Northwestern, University of Southern California, Syracuse, and Vanderbilt. The scholarship is $45,000 for tuition and $20,000 for room, board and books. At state universities, the scholarship would be lower if you were an “in state” student—because tuition would be about $13,000. But if Michigan coach Jim Harbaugh recruits nationwide and wants a high school player from California or Texas, the University of Michigan out-of-state tuition bumps up to about the same as that charged by the private colleges.

That’s the old model. In the new era, a coach could offer a recruit a salary instead of a scholarship. Does a $100,000 salary give the student-athlete a better deal than the $65,000 scholarship?

The $100,000 salary is impressive. A future Heisman Trophy winner might command more, but $100,000 is not bad for an 18-year-old high school recruit. But since it’s a salary, not a scholarship, it is subject to federal and state income taxes. Tuition and college expenses would not be deductible because the income level surpasses the IRS eligibility limit.

So, a student-athlete paid a salary would owe $23,800 in federal income tax and $6,700 in state taxes, a total of $30,500. In cities that levy an employee payroll tax, the salaried student’s taxes go up about $2,400 per year. Income taxes then are $32,900. And, as an employee, the player would have to pay at least $2,000 in other taxes, such as Social Security, for a total of $34,900. This leaves the college player with $65,100. Since college bills come to $65,000, the player has $100 left.

By comparison, how bad was the scholarship model? According to the federal tax code, the $45,000 tuition award is deductible, but room and board are not. The student-athlete will be able to deduct book expenses and qualify for a tax credit under the American Opportunity Tax Credit (AOTC), reducing his tax. The bottom line is that the student-athlete gets a $200 refund in federal taxes and pays $820 in state taxes, for a total tax bill of $620. There’s no local payroll tax because he was not an employee. This means $64,380 of the $65,000 scholarship can go toward paying academic expenses of $65,000.

How does the salary compare to the scholarship for student purchasing power? The $100,000 salary gives the college sports “employee” an advantage of $720 per year, the difference between his net salary of $65,100 versus the scholarship player’s net of $64,380. That’s not great news for the salaried player. It’s bad news for the athletics department which paid $100,000 in salary rather than $65,000 in scholarship, driving up expenses $35,000.

What’s clear is that paying salaries for college players is a taxing situation. Each case will vary by state. The case above used a moderate tax state, Kentucky. Massachusetts (a.k.a. “Taxachusetts”) will be more painful. In following all the “pay for play” contests, the skilled players will be dueling accountants and agents.

There’s crucial a human dimension to the “numbers game.” Star high school athletes are talented. Coaches and sports journalists reinforce this perception. But players and their families often overestimate a player’s market worth. They fail to recognize how many equally talented players are competing for a salary. Many All-State players may be surprised that college coaches are not willing to pay them $100,000 or even $50,000.

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High school and college players understandably use the National Football League and the National Basketball Association salaries as the gold standard. Multimillion-dollar contracts make professional sports part of the American Dream. But since the NFL and NBA are the pinnacle, it’s good to add the full range of professional sports leagues when a college player plans his financial future. Former college stars on professional indoor football squads make about $225 per game—with a $25 bonus if the team wins. Outside the NBA, players in the professional developmental league—one step from making a NBA squad—make about $43,000 per year. The college scholarship model may not be so bad for student-athletes after all.

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John Thelin, a professor at the University of Kentucky, is author of A History of American Higher Education, published by Johns Hopkins University Press. In 2006 he was selected for the “Ivy League at 50” roster of outstanding scholar-athlete alumni. He most recently wrote for MONEY on Why Students Are the Biggest Losers in Today’s College Bowl Games.

 

 

Why Pro Athletes Get Paid Too Much

"Baseball is the belly of society. Straighten out baseball and you'll straighten out the rest of the world." Bill Lee People have a tendency to pay for things they love to see, but has it gone too far? Bill Lee thinks it has and so do many other baseball fans. There was once a time where a father could go to the ballpark with his family for $10 and see their favorite Yankee play, but now things have changed. For a family of four to go see a Major League Baseball game it will cost them anywhere from $200 to $250 to sit in tight, compact seats, while trying to watch the same man as everyone else is. People ask why professional athletes get paid too much; it's because we allow it. What we pay for, why we pay, and where our money goes are only a few of the ways we know that professional athletes are paid too much.

Big names in the sport business get paid a lot of money to play around and entertain the crowds. Meanwhile, the crowd pays a lot of money be entertained. The crowd is full of doctors, lawyers, teachers, and mechanics that have paid thousands of dollars to earn the money to get to the game in the first place. The players that are being watched normally haven't worked hard towards a good education. Some have been recruited right out of high school, while most got huge scholarships to play sports at prestigious schools. These schools will do almost anything to keep their best players in school. So they athletes can eventually make it to the professional level, with or without a degree. One might argue that some people get money for being good with their brains, why shouldn't people get money for being good with their bodies; on the other hand, since when have we paid someone $12 million to think and have fun? It's not all the athletes' fault though. Once the player becomes good, many different teams will seek him or her after. Soon after, the highest bidder will get he or she on his team. What is the difference between $80 million and $90 million? Players will even stop playing completely if they think that they aren't making enough money. So much for the idea of playing for fun. The world of sports has become another business world, which is the reason why athletes get paid so much.

Alex Rodriguez, Michael Jordan, and Roger Clemens will make a combined $12,500 an hour over the course of the next 5 years. That's $547,500,000, enough to support 100 families for at least 50 years. (Peden, 2000, Sept. 29) Yes, I know that they are good at what they do, but so are the trash men that...

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