Tax Laws Mean LeBron Could Make More Money in Miami
Sadly, it’s beginning to look more and more like Stephen A. Smith could end up being right. Although it was probably a complete guess and a fast way for him to create a buzz, we just might have to listen to him saying, “I told you so” on every radio show and TV station that will have him in the sporting world.
When LeBron James says things like, “It’s not about the money,” he’s really not lying. Of course he wants to make as much money as possible. He just knows that no matter where he plays he’s going to be able to do that, therefore there’s no need to concern himself with it. All this talk of LeBron, Chris Bosh, and Dwyane Wade splitting cash really doesn’t matter in the long run because he’s going to make an astronomical amount of dough wherever he ends up.
When we think about contracts and max deals and salary cap rules in the NBA, there’s so much that we’re leaving out. Darren Rovell of CNBC gave us a perfect example of what I’m talking about with a discussion about state income taxes and how they’ll factor into how much money LeBron makes at the end of the day. Here’s Rovell’s breakdown, courtesy of Pro Basketball Talk:
Playing in Cleveland, LeBron would face a state income tax of 5.925 percent, plus a Cleveland city tax of two percent.
Over the first five years of a new contract with Cleveland, James would give back $3,953,060 combined to the state and city for the 41 games each season he’d play at home. But James would have to pay none of that for home games in Miami since Florida doesn’t have an income tax.
Athletes have to pay income taxes to states that they play in on the road, so the games he’ll play away from home — whether he played for Cleveland or Miami — are essentially a wash. But there are, on average, 11 away games per season where James would have to pay Ohio and Cleveland taxes. Why? Because he has to pay when he plays in the six areas – Florida, Texas, Washington D.C., Illinois, Toronto and Tennessee – that have no jock taxes.
That’s another $1,061,128 he’ll have to pay in taxes that he wouldn’t have to pay in Miami.
Research like this reminds us that salary figures don’t even begin to scratch the surface of how a professional athlete — especially a global icon — makes money. Does that mean LeBron is going to the Miami Heat because he and his agent sat down and worked through tax figures and determined he’ll be better off financially in South Beach? Absolutely not. But if you think the fact that Cleveland can offer LeBron more years and more money has factored into his decision even a little bit, you better think again.