... . In say CA they have to pay state and fed taxes if the tournament is held there. ...
Hmmm, I see that CA has a "jock tax" -- created specially for high-earning athletes. It seems that even some cities have such a tax. According to our computer overlords:
AI Overview
California state taxes for visiting athletes
California levies an income tax on the portion of income earned within the state by professional athletes (and others) who do not reside in California. This is commonly referred to as the "jock tax".
Here's how it generally works:
Scope: The jock tax applies to income earned by professional athletes, coaches, trainers, and other individuals associated with a sports team who travel and earn income in different states.
Origin: California introduced the jock tax in 1991, taxing the earnings of visiting athletes like Michael Jordan and the Chicago Bulls during the NBA Finals in Los Angeles. This led other states to adopt similar measures.
Calculation: The jock tax is typically calculated by determining the portion of an athlete's income that is subject to the tax. This is often done using a "duty days" method, where the number of days spent performing services (games, practices, travel) in California is divided by the total number of duty days for the season.
For example, if a player's team has 200 total duty days in a season and they spend 10 of those days in California, then 10/200, or 5% of their total salary, would be subject to the California jock tax.
Withholding: Withholding agents (like teams or event promoters) are required to withhold 7% from payments to nonresident payees (including athletes) when the total California-sourced income exceeds $1,500 in a calendar year.
Impact: Athletes playing for California teams face a high marginal tax rate of 13.3%, which is the highest state-level tax in the U.S.
Deductions & Planning: Athletes can claim deductions and credits, and strategic tax planning can help them manage their overall tax burden. For instance, credits for taxes paid in other states can help prevent double taxation.
Important Note: The jock tax rules and regulations can be complex and vary by state and city. Athletes should consult with a tax professional specializing in athlete taxation to ensure compliance and understand their specific tax obligations