How to Predict Super Bowl Winners?

Sunday night marked the 45th installment of America's annual salute to all things hype. Celebrities! Concerts! Commercials! If you looked hard enough, you might have even found a pretty good football game.

The day before the game, the Wall Street Journal weighed in with the kind of observation you'd expect them to make — specifically, that "the Steelers will get to keep a lot more of their season earnings, though both team's players would be a lot richer if they played all their home games in Dallas."

The difference, of course, is taxes. Super Bowl MVP Aaron Rodgers and his Packer teammates play their games in Green Bay, where they pay Wisconsin state taxes of 7.75% on income over $220,000. (Since the minimum NFL salary is $310,000, that means every Packer pays the top rate.) The AFC champion Steelers play in Pittsburgh, where they pay Pennsylvania state taxes of just 3%. That difference may not look like much, but it adds up fast. Green Bay's Rogers made $8.6 million last year, paying an estimated $3.1 million in federal income and payroll tax and $680,000 in state income tax. He would have saved $398,050 in state tax if he played in Pennsylvania. That's a lot of cheese!

Many states and municipalities have started collecting income taxes from visiting athletes and other performers. This can lead to complicated calculations to avoid double taxation. For example, if this weekend's big game had been played in Pittsburgh, Packers would have paid state tax of 3% of their game-day pay and taken a credit for that same amount against their Wisconsin tax. If the game had been played on the frozen tundra of Lambeau Field, the visiting Steelers would have paid Wisconsin tax on top of their regular Pennsylvania tax!

But Texas, site of this week's game, is one of seven states with no individual income tax whatsoever. Of course, the Super Bowl itself brought millions to the host city, even after accounting for last week's unexpected winter blast. If Texas officials had tried to tax the visiting players, on top of that economic windfall, the refs would have done well to call them for unsportsmanlike conduct!

That's probably not much comfort to the members of the 6-10 Houston Texans and 6-10 Dallas Cowboys, most of whom would probably trade state taxes for a few more W's! (In fairness, however, Saturday's Journal piece points out that Texas taxes beer at twice the rate of Wisconsin or Pennsylvania.)

Stock market forecasters swear by the so-called "Super Bowl indicator," which holds that when a team from the old National Football League (now today's NFC) wins the Super Bowl, it means a good year for stocks. But can state income tax rates help predict Super Bowl winners? This year, the high-tax Packers beat the low-tax Steelers. Last year, the higher-tax New Orleans Saints beat the lower-tax Indianapolis Colts. But in 2009, the lower-tax Steelers beat the higher-tax Arizona Cardinals. And in 2008, the high-tax New York Giants beat the lower-taxed New England Patriots. So don't bother checking tax rates before entering your Super Bowl pool!

The lesson for us is that we tend to focus on federal income tax — for most of us, it's as obvious as an opponent's defenders looming large at the line of scrimmage. But we can't forget state and local taxes, hiding in the backfield like a defensive secondary. So think of us as your financial offensive line, protecting you from all tax threats. And don't worry, football die-hards, the NFL pre-season starts in just six months, if the players don't strike!