Future Taxes Affect Current Behavior

Some sports talk hosts jumped to conclusions when they commented on the weekend sale of sports memorabilia. They opined that it was too bad that a retired sports great "had to sell" his awards "because he needed the money." The article begins:

Ozzie Smith is considered one of the greatest, if not the best, defensive shortstop of all time, as evidenced by his 13 consecutive Gold Glove Awards.

Those awards now belong to someone else.

SCP Auctions announced Sunday that Smith sold the Gold Glove Awards from 1980-92 for $519,203.

Smith also sold two World Series rings that were given to him as gifts from the St. Louis Cardinals. His 2011 St. Louis Cardinals' World Series ring sold for $51,364 and his 2006 ring went for $42,448.

Ozzie Smith may or may not "need the money," a subjective assessment to be sure, but it's clear that if he or any other athlete intends to monetize some of their collection eventually, this is the year to do it. Capital gains rates will escalate under the "fiscal cliff" and are likely to go up after 2012 even if a compromise is reached. In addition, in 2013 an extra 3.8% surtax will apply to investment income, which includes capital gains, of individuals reporting $200,000 or couples reporting $250,000.

Collectors are cognizant of the tax cliff and appear to be taking some of their profits now. The article goes on to talk about sellers who are obviously not the original athlete-owners:

Other historical sports items sold by SCP Auctions:

--A Babe Ruth team sweater from around 1922 sold for $250,642.

--A Lou Gehrig game-used bat from 1938 or '39 sold for $75,205.

--A pair of Muhammad Ali boxing gloves used during his fight against Sonny Liston on Feb. 25, 1964, and another pair used during his first bout against Joe Frazier on March 8, 1971, each sold for $385,848.

--Oscar Robertson's NBA MVP Award from 1963-64 sold for $177,632 and a Robertson 1960 U.S. Olympic team jersey sold for $121,324.

--Paul Hornung's 1956 Heisman Trophy sold for $173,102.

--Steve Wright's 1966 Super Bowl ring from the Green Bay Packers sold for $75,205.

It wouldn't be at all surprising if government tax receipts go up "unexpectedly" at the end of 2012 despite slow economic activity.  A loaded gun sometimes can affect behavior more than a gun that is used. © 2012 Stephen Yuen