State Taxes Matter, Lesson #21

When does $108 million equal $80 million? When you’re leaving California and heading to Texas.

DeAndre Jordan has been playing center for the Los Angeles Clippers of the National Basketball Association. Mr. Jordan just signed a free agent deal with the Dallas Mavericks for $80 million, $28 million less than what he was offered to stay with the Clippers. It might be that Mr. Jordan believes that the Mavericks have a better chance at winning the 2015-2016 NBA Championship. Perhaps he likes Texas better than California (his hometown is Houston). It also might be that Mr. Jordan likes keeping more of what he makes.

Marc Spears of Yahoo Sports noted to NBA TV,
“First of all the taxes are so bad in my home state of California it ends up being about even.” California’s top tax rate is 13.3%, so if all of Mr. Jordan’s contract were subject to the top California tax rate he’d end up at $93.6 million–still a bit more than the $80 million he’ll get with the Mavericks. Because of Jock Taxes some of what Mr. Jordan will earn will still be subject to various state and local taxes (including California’s); the Spurs will play road games in Los Angeles, Oakland, and Sacramento.

Another NBA free agent, LaMarcus Aldridge, signed for $80 million with the San Antonio Spurs; he played for the Portland Trailblazers last year. Mr. Aldridge is leaving Oregon (which has a 9.9% maximum rate) for Texas’ 0% rate. Yes, the Spurs might be a better team than the Blazers and Mr. Aldridge may like the Spurs’ organization more, but I’m also certain he likes that his tax rate just went down.

One Response to “State Taxes Matter, Lesson #21”

  1. […] Fox, ¬†State Taxes Matter, Lesson #21. The math is easy for highly-paid athletes, or at least for their […]

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