Sorry, Cavaliers, fans that the LeBronathon didn't turn out like y'all had hoped.
I don't follow hoops, but I am a fan of other sports so I know how awful LeBron James' decision to ditch his hometown Cleveland team for the Miami Heat feels right now.
But don't take it personally. Professional sports is a business, a big business. And sentiment, I have learned the hard way over the years, has no real place in any major league.
What does come into play, however, is the potential taxes due on all those high-dollar contracts.
That's why Kyle Gillis of the Business & Media Institute examined LeBronomics prior to the NBA free agent's announcement of which city he'd next call home and came up with a prescient tax prediction.
Miami was the obvious choice.
Remember, with the so-called jock tax collected by most states (and many cities), professional athletes (and other workers) typically must pay taxes to the taxing jurisdictions for the time they spend there playing, i.e., doing their job.
But by having a base in a state with low or no income taxes, the athletes can save substantial tax dollars, since half of a team's games are at home.
With no state income tax in Florida, that means LeBron doesn't have to worry about handing over any state taxes for those basketball games played in the Miami arena.
Or, notes Gillis in citing a New York Post analysis, "The tax savings for James in Miami over New York would be staggering."
The TaxProf Blog added its two cents to the calculations and came up with what a five-year contract worth $96 million would have cost LeBron in state taxes if he'd opted to play for one of the other bidders for his services:
- New York Knicks: $12.34 million
- New Jersey Nets: $10.32 million
- Cleveland, Ohio, Cavaliers: $5.69 million
- Chicago, Ill., Bulls: $2.85 million
So, once again Cleveland fans, I offer my sporting condolences for your loss. Just remember each April one of the key reasons why LeBron headed to the Sunshine State.
You can read more on King James and his potential taxes in posts at the Sports Law Blog and the Tax Foundation.
Related posts:
- Who Dat owe IRS? The NFL's Saints
- NFL opposes IRS' expanded salary reporting rule
- Taxes spur Steelers ownership deal
- NFL Eagles pass on ex-con tax credit
- Former Steeler owes IRS $631,000
- NBA tax subsidy: Fans vs. public policy
- Tax-exempt bonds and sports facilities
- British taxes drive off sports stars
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tax relief
James will not be paying state income taxes to Florida does not mean he will not be paying state income taxes anywhere.
irs tax attorney
I don’t suppose that last last year the state of Ohio told LeBron he didn’t have to pay taxes when he was playing in Florida.
Jerry Morris
I believe there are various reasons for him to make such a decision at the expense of heart-broken fans. Paying less taxes is one reason and getting his first championship ring is definitely the most important one.
milton
I found this comment rather interesting because of the tax implications — if he remains an Ohio resident, any income he earns will still be considered taxable to the state of Ohio. I’m guessing he actually just misspoke and that his financial advisor (or team of advisors) will eventually make him aware that it will be much more advantageous for him to become a resident of Florida. However, it also could have been a calculated statement attempting to appease his fan base back home that no doubt was upset by the news that he was leaving. Either way, I think he has no intention of remaining a resident of the state of Ohio (although he still may keep his home there and just call it a second residence)….
Matrimonial
webdesigner
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Tax Problems
Lebron made his choice. We all have to accept that. He’s a business owner (Lebron Inc.) and like many business owners, if he can make more money and have less of a tax burden by relocating his business to another state, then why not? Unfortunately Cleveland suffers, which is too bad.
clevelander
the cavs actually were allowed to and offered to pay him tens of millions more than the heat because he would be resigning rather than changing teams. this difference far outweighed the taxes. and the reason he didn’t pick new york is because its become one of the worst franchises in american sports, not because their taxes are higher.
dining tables
Wow that decision is wonderful. I can see the Miami as the 2011 NBA Champion. With Lebron James and Dwane Wade. No team can defeat Miami now.
Joe T. Taxpayer
Actually, if you listen to the entire interview that Lebron gave last night, he mentions how difficult the decision was (yeah, right!), that Cleveland will always be his home and he still intends to live in Ohio. I found this comment rather interesting because of the tax implications — if he remains an Ohio resident, any income he earns will still be considered taxable to the state of Ohio. I’m guessing he actually just misspoke and that his financial advisor (or team of advisors) will eventually make him aware that it will be much more advantageous for him to become a resident of Florida. However, it also could have been a calculated statement attempting to appease his fan base back home that no doubt was upset by the news that he was leaving. Either way, I think he has no intention of remaining a resident of the state of Ohio (although he still may keep his home there and just call it a second residence).