• Loading stock data...
Thursday, June 26, 2025

Why the Race to Cut College Athlete Taxes Creates a Recruiting ‘Prisoner’s Dilemma’

The potential pitfalls of the legislation could outweigh the benefits, according to two tax experts who spoke with Front Office Sports.

Feb 22, 2025; Baton Rouge, Louisiana, USA; Florida Gators guard Alijah Martin (15) dribbles against LSU Tigers guard Cam Carter (5) during the first half at Pete Maravich Assembly Center.
Stephen Lew-Imagn Images

State lawmakers have discovered a potential weapon in the college sports recruiting arms race: NIL (name, image, and likeness) tax exemptions.

Throughout the past several months, legislators in Georgia, Alabama, and Illinois have introduced bills that would exempt NIL deals from state income taxes. Legislators in Louisiana are reportedly about to introduce a bill of their own. The goal, they hope, is to entice recruits to their flagship universities, both strengthening their rosters and potentially earning more money through more ticket sales. 

But the potential pitfalls of such legislation could outweigh the benefits, according to two tax experts who spoke with Front Office Sports. Giving athletes a tax break means states would ultimately sign away their ability to earn extra tax revenue without any meaningful impact in recruiting or increased athletics earnings.

NIL earnings have become a key factor in players’ decisions of where to enroll or transfer—and they’re expected to become even more important in the potential revenue-sharing era. But they aren’t the only factor.

Some say offering tax incentives wouldn’t even improve recruiting because of the disparities in state tax laws that already exist. Katie Davis, a partner at James Moore & Co. consulting firm that works with athletic departments nationwide, notes that Florida, for example, doesn’t have any state income tax, while other programs, even within the SEC, reside in states that do. Since the NIL era began in 2021, she says, there’s no evidence of a major recruiting advantage because of that tax disparity. 

“I think what would probably move the dial in recruiting more would be if coaches had tax professionals on retainer,” Davis tells FOS.

The main reason why tax incentives for players aren’t an effective tool is what University of Central Arkansas economics professor Jacob Bundrick describes as a “prisoner’s dilemma.” If multiple states begin introducing NIL tax breaks, it ceases to become a competitive edge for schools. 

“If you’re the first mover on this [policy] there might be an advantage,” Bundrick, who has studied the impact of state tax incentives in the sports industry and beyond, tells FOS. “But if there really is an advantage, and we see that in terms of spending and enrollment, you can expect that other states will follow.” At that point, having a favorable tax policy becomes a matter of keeping a level playing field, rather than providing a significant competitive boost. 

Meanwhile, states could lose out on potentially valuable tax revenue.

Illinois state senator Travis Weaver argued that, because the NIL industry is new, relinquishing tax revenue from NIL deals isn’t actually losing out on tax earnings. “The nice thing about this is it’s not existing revenue, which I think makes it a lot easier,” he told CBS Sports. “It’s hard to cut a tax when it’s something that you have been collecting and it’s baked into your budget, whereas this, we’ve never been taxing, NIL [income], not to mention that there hasn’t really been any, right? I mean, this is just such a wild, wild west.” 

Bundrick disagrees. NIL deals are just a new deployment of capital that companies would already be using elsewhere if NIL opportunities didn’t exist. “If anything, it’s simply a shift within the way that they are going about spending those advertising dollars,” he says.

He also notes that income tax specifically is supposed to draw from a broad pool of earners—and the more legislators “whittle down” those groups, the more income tax rates end up burdening the rest of the population. 

“Most economists would say that this is bad tax policy.” says Bundrick.

Linkedin
Whatsapp
Copy Link
Link Copied
Link Copied

What to Read

breaking

Cooper Flagg Goes No. 1 to Dallas, Capping Mavs’ Rapid Rebuild

The expected selection extends a wild turn of events for Dallas. 
Sep 16, 2023; Stanford, California, USA; Sacramento State Hornets running back Elijah Tau-Tolliver (25) celebrates after a touchdown during the fourth quarter against the Stanford Cardinal at Stanford Stadium.

Sacramento State ‘Full Steam Ahead’ for FBS Despite Not Receiving NCAA Waiver

The Hornets launched a public campaign to join the FBS last fall.
Jun 20, 2024; Eugene, OR, USA; Detailed view of Nike Alphafly 3 racing flat at the Nike by Eugene store.

Investors Hunt for Signs Nike Has Regained Its Footing

Nike’s fundamentals are “still challenged.”
Wimbledon

Players Suing Tennis Begin Negotiations With Grand Slams

They may add the Slams as defendants if talks fail in 90 days.

Featured Today

Mar 15, 2025; Fort Worth, TX, USA; UAB Blazers forward Yaxel Lendeborg (3) dribbles the ball upcourt against the North Texas Mean Green during the first half at Dickies Arena

NIL Is Shrinking the Pool of NBA Draft Entrants

Agents are now advising many players to stay in school.
Apr 24, 2025; Green Bay, WI, USA; Penn State Nittany Lions defensive end Abdul Carter on the red carpet before the 2025 NFL Draft at Lambeau Field
June 21, 2025

‘More Is More’: The Elite Luxury Jewelers Decking Out Athletes

Meet the elite group of luxury designers crafting the biggest statement pieces.
Dec 5, 2024; Miami, FL, USA; FIFA president Gianni Infantino presents the FIFA Club World Cup trophy during the Club Word Cup draw at Telemundo Studios.
June 15, 2025

Revamped Club World Cup Is FIFA’s Billion-Dollar Gamble

The revamped soccer event debuts amid controversy.
Jun 10, 2025; Nashville, Tennessee, USA; United States head coach Mauricio Pochettino stands during the anthem against the Switzerland during the first at Geodis Park
June 14, 2025

Gold Cup Is Complicated for USMNT—but U.S. Soccer Has Its Eyes on..

Uncertain tournament success isn’t fazing forward-looking U.S. soccer.
Jun 7, 2025; Chapel Hill, NC, USA; North Carolina infielder Jackson Van De Brake (6) and outfielder Carter French (18) celebrate an out during the first inning of the Super Regionals game against Arizona in Chapel Hill, North Carolina.

Most Power Conference Sports Won’t See Revenue-Sharing Dollars

But there is a silver lining for Olympic sports: more scholarships.
Dec 27, 2024; San Diego, CA, USA; The Washington State Cougars ban perform during the second half at the Holiday Bowl at Snapdragon Stadium. Mandatory Credit:
June 23, 2025

Pac-12 Announces CBS As ‘Anchor’ in New Media-Rights Deal

The league may announce expansion before finalizing the rest of the package.
June 23, 2025

Colleges Are Raising Student Fees to Pay for Athlete Revenue-Sharing

Schools are preparing to pay student athletes up to $20.5 million annually.
Sponsored

Hottest Matchups Following NFL Schedule Release

The NFL released the 2025 regular-season schedule, and anticipation is already building in the ticket marketplace with four months to go.
Wisconsin cornerback Xavier Lucas (6) is shown during the first quarter of their game against South Dakota Saturday, September 7 , 2024 at Camp Randall Stadium in Madison, Wisconsin.
June 20, 2025

Wisconsin Sues Miami for ‘Tampering’ With Football Transfer

Xavier Lucas signed NIL deals in Madison before transferring to Miami.
June 19, 2025

Omaha Delivers Again: LSU, Coastal Carolina Set for CWS Showdown

LSU and Coastal Carolina begin their three-game series Saturday.
Washington's Ben Gorsage, right, and Orland Park Sandburg's Mateo Ramiro-Garcia tangle at the start of the Class 3A state 800-meter run Saturday, May 31, 2025 at Eastern Illinois University in Charleston. Gorsage took third place, followed by Ramiro-Garcia in fourth.
June 19, 2025

Dozens of Olympic Sports Have Been Cut in Wake of House v...

Tennis, track and field, and swimming and diving appear heavily impacted.
Jun 16, 2025; Omaha, Neb, USA; Arkansas Razorbacks starting pitcher Gage Wood (14) celebrates completing a no hitter against the Murray State Racers at Charles Schwab Field.
June 17, 2025

College World Series Enters Cinderella Era

A series of upsets gives the fast-growing event a new look this year.