Thursday, July 08, 2010

Could the lack of Florida income taxes help seal the deal for LeBron?

While we all wait with bated breath to witness where LeBron will end up going, the strong rumors out today are that he will join his buddies Wade and Bosh in Miami. That is what Chis Broussard is reporting at ESPN, although he cautions that it isn't a done deal. Under the Byzantine NBA payment rules, this means that all three players will have to leave some money on the table to come in under the salary cap. So, on the face of it, LeBron would be giving up several million if he goes to Miami instead of staying in Cleveland.
Opting for Miami could cost James millions of dollars in salary. The Cavaliers could sign James to a six-year contract for about $125 million. Assuming he splits the available cap space evenly with Bosh and Wade, the most James could get in Miami would be five years and about $90 million.
Bill Bradley, sports editor at the Sacramento Bee, points to the advantage that Florida and Texas have with players because they don't have state income taxes.
With a day left before NBA free agents can start signing, don't discount the savings of state income tax. Or the lack thereof.

The absence of state income tax in Florida and Texas is a big reason the Miami Heat and Dallas Mavericks can be active in free agency.

Compare that to the New York Knicks, whose players have to pay combined state and city income taxes of 12.618 percent. That means Amar'e Stoudemire's five-year, $99.8 million deal with the Knicks is worth about $12 million less than if he had signed with the Heat.

While athletes are taxed by other states when playing road games, they come out well ahead if they live in Texas or Florida.

Yes, these Florida and Texas teams had to have salary cap space to get involved in this circus. Yes, they wanted to improve their rosters.

But think about this: There are five NBA teams in Florida and Texas. Those are the only teams without state income tax. All five are among the most competitive in the league.

It won't be discussed in news conferences, but state income tax will speak loudly this week.
Ohio's state income taxes are quite a bit lower than New York's - close to 6% for LeBron's bracket. He's still leaving several million on the table if he leaves Cleveland. But you have to compute the lack of income tax in when you're comparing the various offers. And New York starts with a big disadvantage. Perhaps living in the Big Apple compensates for these guys, but hey, Miami isn't such a bad spot to live and playing with his buddies as a definite contender for the championship might outweigh all the snazziness of playing in New York. And the lack of income tax doesn't hurt either.

Of course, the rumors about Miami could all be a massive fake out. And 6% of $125 million is chicken feed to LeBron. But it is all an aspect of sports payroll talk that doesn't get figured in when you're listening to the sports gurus on TV and the radio.

2 comments:

Bachbone said...

From hearing other athletes talk, I'm guessing a championship ring means more to James than a few million in taxes. If a better chance to win one existed playing in a high tax state, he'd happily pay the extra taxes.

tfhr said...

This puzzles me:

"While athletes are taxed by other states when playing road games, ...."

I have to wonder if the flight attendants and aircrew on the charter that moves the team is also given the same "treatment", with regard to state taxes. For that matter, does this sort of arrangement impact commercial pilots, flight engineers, or flight attendants based in New York when they fly to LA or Dallas? What about a crew based in Miami or Dallas? I could see where an independent contractor would be vulnerable to state taxes where a specific job was performed, but if you're not self-employed and your legal residence or business is located in another state....

Maybe we should consult Charlie Rangel. He knows how to deal with tax laws and regulations.

FLAT TAX for all.