Anyone that is remotely a sports fan, or has even glanced at ESPN for more than 15 seconds over the past few days, is well aware that the basketball world is holding its collective breath waiting for LeBron James and Carmelo Anthony to make their decision on what jersey they will be suiting up in next year.
As of this writing the Twittersphere, and most likely the universe itself, is still waiting on “King James” in particular to make the decision that most likely will open the floodgates and cause the rest of the free agency dominoes to fall. In light of the media circus surrounding this ordeal The Heritage Foundation’s newly launched news site, The Daily Signal, published a graphic and story last week that showed the differences in state income tax James would incur depending on which team he selected of the ones he was considering:
I found it to be an interesting view of a factor in James’ decision that may not be as publicized as “The Letter” or the supporting cast of teammates, but one that James may be seriously considering like many other professional athletes in recent memory.
As the buzz around “Decision 2.0” has grown over the past several days, I felt intrigued to take the numbers a little further and see how much James would owe in state income taxes based on every team in the NBA. To do so I utilized the same factors as Heritage; an estimated $20,700,000 annual salary, no city tax or deductions, and the highest income tax bracket possible. The rates I used in my calculation were the state income tax rates for 2014 listed by the Tax Foundation. Before getting into the numbers, yes, I am aware that he would never go play for Milwaukee:
|Team||Owed Taxes||Tax Rate||Team||Owed Taxes||Tax Rate|
The obvious observation here is that James has saved himself quite a nice chunk of change by spending the last 4 years in South Beach as opposed to any of the 22 teams that reside in states which levy state income taxes.
Now on a statistically less conclusive path, is it a coincidence that the past 4 NBA championships have been won by teams that reside in states with no income tax? Maybe. Is it a coincidence that of the ten teams with the highest state income tax burden only the Lakers have won a championship since the 1977 Portland Trailblazers? I will let you decide.
Also, I know that Toronto was not included, but as the Canadian province of Ontario is not part of the greatest country on earth I hope you will understand why I omitted the Raptors.
After finding the state income tax hit James would take for all NBA teams, I wanted to go a little further again, so I went ahead and did the calculation for an imaginary world where all 50 states had an NBA team. Yes, I am aware that there will never be an NBA franchise in Alaska, Hawaii, Maine, etc., but let’s see what it would look like if joining the Alaska Quake was an option:
|State||Owed Taxes||Tax Rate||State||Owed Taxes||Tax Rate|
|North Carolina:||$1,200,600||5.8||New Hampshire:||$1,035,000||5|
|South Dakota:||$0||0||North Dakota:||$666,540||3.22|
As interesting as the figures may be to look at and compare, there are not too many surprises. Income taxes are high in states such as California, Oregon, Minnesota, New Jersey, and New York.
However, after looking at this chart I will tell you this, if I was a player for Sacramento back in May 2013 I would have done everything in my power to grease the wheels for that move to Seattle.
The latest report seems to be that James will be heading back home to Cleveland, although that seems to change by the minute from various “sources”, and these sources seem to be as reliable as the Obamacare website. The truth of the matter is that for someone whose net worth is estimated at nearly $270 million, taking the $1.1 million annual hit of income taxes may not matter a whole lot. With that being said I must mention that signing with my hometown Pistons over the Cavaliers would annually save him $236,394 a year (I am just saying that could buy him one of these).
As I am writing this James could be making his decision over Twitter, on Good Morning America, or at a UN Global Council Meeting, but will we ever know if taxes played a role? Probably not, but based on the statistics I think the main takeaway is that legislators in states such as Oregon, Minnesota, New York, and Wisconsin should really consider repealing or lowering (or at least make it flat!) their state income tax rates if they want to bring home some Larry O’Brien trophies in the future. California should be included on that list as well, but I guess that makes the success of the Lakers even that much more impressive.
While the factor of state income taxes may not matter as much to the true megastars such as James and Anthony, it very well could play a crucial role in the decision making process of lower level players with less money to work with.
So good luck to James wherever he ends up, but it will still be hard for me to understand how he could pass up the chance to save $1.1 million a year in taxes if he chooses to leave Florida for Ohio.
*While James would not have to pay state income tax on his salary in Tennessee, he would on investments because of the state’s Hall Tax.