When business entered college athletics through the passing of NIL (or came out of the shadows, rather), it was only a matter of time before politics were drug into it, too.
Last Friday, Arkansas Governor Sarah Huckabee Sanders signed a bill into law amending the state's NIL law allowing revenue sharing, making payments from Arkansas universities to student-athletes tax-exempt, and protecting those payments from public records requests. The first point, specifically, has gotten some Arkansans in a tizzy.
On a basic level, I get the anger. I understand why hardworking citizens, who pay tons in taxes yearly, are upset that young men and women will be exempt from facing the same hardships solely because they're athletes. It's unfair.
But here's the thing: life isn't fair. It's something people are taught from a young age, but it's still a fact we often forget.
However, in this case, that's not the question that should be asked. Instead, we as Arkansas fans—and citizens of Arkansas if they don't follow the Hogs—should ask, "Is it worth it?"
First, we'll discuss the negatives.
The cost of exempting taxes for Arkansas NIL payments
While we go through this step-by-step, remember that this isn't only for the University of Arkansas' football and basketball programs. It's for every student-athlete in the Natural State. According to an annual report by the Arkansas Department of Education, that amounts to 4,132 students spread over 10 Arkansas universities and eight 2-year institutions.
It may surprise some, but not every student-athlete receives lucrative NIL deals amounting to millions of dollars. Of course, a select few athletes make a ton of money, but when the NIL's true picture is broken down over the entire collegiate landscape, that number drops significantly.
In August 2024, Sports Illustrated's NIL branch (NIL Daily) reported that the average "Total Athlete Earnings" reached $21,331. However, the median earnings were only $480. That indicates the data is positively skewed, with a few extremely high values, such as million-dollar deals, significantly raising the average. That bit of information is immaterial for this particular article, but it's good to remember that the vast majority of student-athletes make next to nothing in NIL contributions.
Now, at $21,331 for 4,132 student-athletes, the total NIL payments earned are approximately $88,139,692. Let's assume that every student-athlete is in Arkansas' top tax bracket (most are not, to be clear); the income tax rate is 3.9 percent, which is $3,432,000 in revenue for the state.
Other than some hurt feelings, that's all the unfavorable effects of exempting taxes for NIL payments, and compared to what Arkansas collected this year, $3.4 million is chump change. Within the first nine months of the 2024-25 fiscal year, Arkansas generated $2.569 billion in personal income taxes, according to Talk Business & Politics. If this trend continues, the total could reach approximately $3.425 billion by the end of June. The revenue generated from taxing student-athletes at the highest rate possible results in .1 percent of Arkansas' total personal income tax revenue.
If that doesn't tell you how little impact taxes from NIL payments would have on Arkansas' coin purse, here's an example that might be closer to home. A significant portion of income taxes go to schools. Springdale School District is the largest in the state, serving 22,745 students, according to Niche.com. The state spends around $13,000 per student to fund schools, so the estimated cost to run a school district like Springdale is $303,099,870. After implementing taxes from NIL, the district would still need $299,667,870 to function.
What are the benefits?
Now that we have discussed the drawbacks, let's shift our attention to the benefits. The first benefit is the primary reason the bill was introduced: exempting NIL payments serves as a significant recruiting tool. While state taxes are eliminated, NIL payments are still subject to federal taxes, which can be as high as 37 percent. With state taxes included, almost half of the large NIL incomes go toward taxes. Therefore, if Arkansas can position itself to allow athletes to benefit from NIL opportunities more than other states, it will give the state an advantage in recruiting.
I love the state of Arkansas. You love the state of Arkansas. Players convinced to play for the Razorbacks learn to love the state of Arkansas. But let's face it. On the national level, there's a negative stigma around the Natural State. Sometimes, it's hard to get recruits to take visits, specifically football recruits. States like Florida already don't have an income tax, and players can have fun on the beach on the weekends. That's an example of what the Razorbacks coaching staff are up against.
However, for those Arkansans not interested in the Hogs—yes, we're not forgetting about you—improved recruiting can have a positive effect on the economy of Arkansas. In 2015, the Center for Business and Economic Research at the University of Arkansas conducted an independent economic impact study that estimates that the athletic program generates $153.6 Million annually for the economy. But how does this relate to recruiting?
Well, if Arkansas Athletics falls behind in recruiting, the product on the field will also regress. Fewer wins means fewer people in the stands. And without people in the stands, that $153.6 million will drop.
And let's not forget the community benefits that come from the student-athlete's charitable contributions. In most NIL contracts, interacting with the community is part of the deal. Arkansas players have worked in soup kitchens, worked food drives, and helped needy families during the holidays instead of being with their own families.
In addition to the time given, not all but many athletes donate to charity. For example, Arkansas kicking star Cam Little donated $50 for every field goal he made during his senior year, and he almost never missed. By the time he left for the NFL, he had donated $1,460 from only the field goals he made as a Razorback.
Contrary to what some people think, this new legislation isn't a slap to the face of Arkansans. I'm no economist, but the cost-to-benefit analysis seems to favor the new NIL law. While it may be unfair, and the state loses some (a very tiny portion) of its tax revenue, the boost in recruiting could have a greater impact on Arkansans than the revenue collected from student-athlete NIL payments ever could.