Nums: When is $87.6 million greater than $118 million?

Short answer: After-taxes … if you’re talking no income Red state (think Texas) and a high tax Blue state (think California).

Just ask former Laker Dwight Howard as he packs to head to the Houston Rockets.


 Here’s the skinny and some nums


First, the back story according to Forbes:

Seven-time NBA all-star Dwight Howard has chosen to sign with the Houston Rockets.

The Lakers lost out despite offering the star $118 million over five years.

Why did he take Houston’s much lower $87.6 million over four years

Tax advisers calculate Howard will collect more after-tax on the smaller deal.

The Lakers are in California, with a killer 13.3% top tax rate.

In Texas, there’s no state income tax.

Specifically, here are the numbers courtesy of the HomaFiles stats department:



Note that it’s a bit of a reach to say that the Laker’s package is less than the Rockets … even on an after tax basis.

But annually, the Rocket’s deal is 7% higher after tax than the Laker’s offer.

On that basis., in Dwight Howard’s case, $87.6 is greater than $118.


Side note: Also according to Forbes:

Professional athletes and entertainers face a dizzying array of tax laws.

Most states and countries tax them when they perform or play in their boundaries.

So, the 7% Rockets’ advantage may be overstated.

Howard will still pay California state income taxes when he plays at the Staples Center.


Point to ponder: Will franchises in low income tax states start to rule the leagues? 

Especially, big market teams in tax-free states ….

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