Mises Daily Articles
Will Manny Pacquiao’s Huge Tax Bill Be Enough for the IRS?
Global boxing star Manny Pacquiao, in spite of the fact he isn’t a US resident or citizen, owes the IRS $18 million, and they plan to demand a lot more when Pacquiao fights in Las Vegas next month.
As most people who at least casually follow boxing know, Floyd Mayweather and Manny Pacquiao will finally be squaring off against one another on May 2. Many sports fans wanted the fight to first take place as far back as six years ago. But hey, better late than never, I guess.
What a lot of sports fans don’t know is that Pacquiao has been engaged in his own fight against both the IRS and its Filipino counterpart, the Bureau of Internal Revenue (other countries have tax collecting monstrosities just like we do). The government in the Philippines (where Pacquiao is from) levied a tax evasion case against him and is attempting to obtain the equivalent of $75 million from the boxing champion. Meanwhile, the IRS has slapped on a federal tax lien for $18.3 million in allegedly unpaid taxes for 2006 through 2010. Pacquiao claims that a treaty between the US and the Philippines prevents his money from being taxed twice.
Doing Business in the US Will Cost You
In his last fight, Pacquiao faced Chris Algieri in Macau, China rather than in a popular US bout destination. As a result, he was able to save millions of dollars since his earnings were not subjected to the 39.5 percent US income tax rate for top tax earners. The combined tax rates of the Philippines (20 percent) and Macau (12 percent) still leave the fighter with a bigger payday for himself than the one he would have had if the fight occurred on US soil. Pacquiao’s desire to avoid taxation does cause one to wonder why he campaigned for Harry Reid in 2010. I guess everyone is a conservative when it comes to his own money.
Perhaps the man known as “Pacman” would ideally want his fight with Mayweather to occur overseas as well. But given the enormous payday for both fighters ($120–150 million for Mayweather, $80–100 million for Pacquiao), those concerns may have been overlooked. Consequently, the US government will be able to extract the full top tax-bracket amount from each fighter as a result of the fight taking place in Las Vegas.
What is Pacquiao Paying For?
Given the amount of money that the US government is about to receive from Pacquiao, it brings to mind the usual claims made on behalf of the state as to why taxes are collected. I’m sure that we are all familiar with these claims. But remember, Pacquiao is not an American citizen. His home is in the Philippines. So when assessing the government’s claimed reasons for wealth confiscation, consider the following questions while keeping in mind the amount of money Pacquiao will be giving to the US government after May 2 (to be added to the $18.3 million the IRS already claims he owes).
- Will Manny Pacquiao ever receive Social Security? (I realize that he likely won’t need it since he’s a multimillionaire, but still.)
- Will any of Manny Pacquiao’s five children ever go to a school receiving money from the US Department of Education?
- How often does Manny Pacquiao drive on an American road?
- Do Filipino citizens demand services from the US military (maybe some do). But more importantly, do Filipino citizens have any say at all over American foreign policy that affects them?
- Will Manny Pacquiao or his family be able to receive Medicare or Medicaid at any point during their lives?
It isn’t difficult to see that Pacquiao’s return on investment for his American taxes is pretty horrible. He may as well have sat in a room with the IRS and said “I’ll have the biggest fight of my career here in the states and you can take 39.5 percent of my earnings while I derive virtually no benefit from the money you take from me.” Will the IRS then back off their harassment of the prize fighter as a result of this decisively one sided deal? My guess would be no.
Pacquiao will weather this storm and remain financially comfortable. But, if Pacquiao’s tax troubles haven’t caused you to feel sorry for him, consider that the IRS routinely harasses those who have far less wealth he does. And if one of the world’s highest paid athletes won’t be able to negotiate his way out of this harassment, what chance could the rest of us possibly have?