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View Full Version : Should the state income tax advantage/disadvantage be changed in the new CBA?



Giaps
08-25-2010, 05:13 PM
I have no solution to this problem, but it's obvious that state income tax can be a huge advantage for teams located in states without any income tax or low income tax vs those teams who play in states with high income tax... usually amounting into a few million more over the life of that contract, including endorsement money. Is this not a loophole in the system that circumvents the salary cap and gives "extra" cap space?

Florida and Texas teams (Miami, Orlando, Dallas, Houston and San Antonio) have the luxury of selling players the fact that they would be playing tax free, potentially earning millions more, while teams like Portland (11%), New Jersey (10.75%), New York (8.97%) and all the California teams (9.55%) are all at a monetary disadvantage. This can also be viewed as tax-free teams being able to offer 11% more, 10.75% more, 8.97% more etc...

There are 2 distinct advantages to tax-free teams:
1) The same valued contract, $10 million per year for example, would earn them more playing there vs high-tax teams. ($10 million in Orlando vs $9,113,000 in NY).

2) The player can be offered a slightly lower salary, make roughly the same amount he would make playing for a high-tax team, and leave the extra cap space to sign other players. Case in point: Miami Heat

In scenario 2, tax-free teams in theory could be granted up to $5.5 million more in cap space (depending on which team it is compared to). The players make the same money as they would in high-tax states, but the team now has that extra room to pursue more talent...

A lot of people will take this as me calling out Miami, but I'm not. Really they're just a prime example because of recent free agency. Orlando, Houston, Dallas, San Antonio all have that same advantage.

Do you guys feel this needs to be addressed in the new CBA or are you fine with the way things are? Obviously the tax-free vs high-tax teams will vote their own biased way.

State income tax rates (http://www.taxadmin.org/fta/rate/ind_inc.pdf)

abe_froman
08-25-2010, 05:17 PM
how could they??? tax laws are made by governments,not teams


ok your upset that your team missed on the main names and them going to mia,but that had do do with a desire to play together...really nothing would have changed that

IndyRealist
08-25-2010, 05:18 PM
Unless the player has his accoutant in the negotiations, I doubt #2 happens that much. #1 could be considered an advantage, but also remember that states without state taxes DO get their money from somewhere. It's usually in the form of increased property taxes, sales taxes, etc.

For the average person, it generally evens out. For high paid athletes (and low income people) there are advantages and disadvantages to living in certain states. It's not just as simple as state taxes.

Southsideheat
08-25-2010, 05:20 PM
the salary cap can be lower for teams in Florida and Texas.

Giaps
08-25-2010, 05:22 PM
how could they??? tax laws are made by governments,not teams
You're right. They couldn't change the state laws obviously and like I said, I have no answer. Maybe a rule that states a player can make no more than a certain amount on his NBA contract and sort of minimize the advantage. Don't really know.

abe_froman
08-25-2010, 05:24 PM
the salary cap can be lower for teams in Florida and Texas.

thats an unfair penalty though ,and nothing to do with nba salary..besides what happens if fl votes to raise taxes,then they are stuck with lower cap and the tax hit that the rest of the teams dont have to deal with

Giaps
08-25-2010, 05:25 PM
Unless the player has his accoutant in the negotiations, I doubt #2 happens that much. #1 could be considered an advantage, but also remember that states without state taxes DO get their money from somewhere. It's usually in the form of increased property taxes, sales taxes, etc.

For the average person, it generally evens out. For high paid athletes (and low income people) there are advantages and disadvantages to living in certain states. It's not just as simple as state taxes.
Depending on the place, but the savings over the life-time of the contract vs possibly lower property tax (on a house that is probably worth 10% of the contract) are not equal at all. Most players are aware of the property taxes and choose to live in areas where they are lower. The same can be said for state income tax.

abe_froman
08-25-2010, 05:27 PM
You're right. They couldn't change the state laws obviously and like I said, I have no answer. Maybe a rule that states a player can make no more than a certain amount on his NBA contract and sort of minimize the advantage. Don't really know.

like i said,ok your upset the guys you wanted went to mia,but that wasnt due to taxes,that was more because they had a desire to team up.you can,but your still subject to the laws of gov's.kobe having to pay more of his salary to taxes than wade does is not the nba's problem.

commonsense12
08-25-2010, 05:40 PM
Well another problem then would be cost of living. It is so much lower in places like Oklahoma compared to NY or LA. But then you have to consider endorsement deals for upper tier players. They obviously would make more money in NY or LA compared to OK. Its hard to say because you prob would need a mathematician to determine the actually cost of all of these factors.

Lloyd Christmas
08-25-2010, 05:51 PM
I think that is the only reason for someone to live in Texas. Take that away and the Texas teams will never sign a free agent. Florida is a different story. So I say change Miami and Orlando's cap and leave the Texas teams the way it is.

BlazingJ
08-25-2010, 05:55 PM
If they can they should, but that is various state's problem, it has nothing to do with the nba teams. I don't think they can change anything

geraptor
08-25-2010, 05:59 PM
i think there is a rule already that allows teams with a tax disadvantage to make up for it with a signing bonus....

dhopisthename
08-25-2010, 06:00 PM
There are many different things that make things unfair in the nba. Like the lakers payroll is more then 20 teams could afford without going into the owners pocket. also of the teams you mentioned they have what 7 championships while la and boston who have high tax rates have like 30+? I think it does help a little but not enough for it to be a problem enough to penalize them for being in a good situation

Giaps
08-25-2010, 06:43 PM
like i said,ok your upset the guys you wanted went to mia,but that wasnt due to taxes,that was more because they had a desire to team up.you can,but your still subject to the laws of gov's.kobe having to pay more of his salary to taxes than wade does is not the nba's problem.
This isn't some personal rant. It's a real problem, in my opinion. It was brought to my attention again mainly because of the Carmelo Anthony/NY tax story (which I don't really believe, but that's a different thread).

i think there is a rule already that allows teams with a tax disadvantage to make up for it with a signing bonus....
That's actually not a bad idea. No idea if it actually exists though.

There are many different things that make things unfair in the nba. Like the lakers payroll is more then 20 teams could afford without going into the owners pocket. also of the teams you mentioned they have what 7 championships while la and boston who have high tax rates have like 30+? I think it does help a little but not enough for it to be a problem enough to penalize them for being in a good situation
LA and Boston's championships, for the most part, had little to do with payroll and were mainly due to the fact that they just kept drafting great players then they trade some of those players for good players and the cycle continued. They obviously have to pay these players, but that wasn't really an issue when they were winning the majority of their championships. Time will tell, but Miami will probably add to that 7 championship total you speak of.

godolphins
08-25-2010, 06:44 PM
the salary cap can be lower for teams in Florida and Texas.

Seriously? How is that fair?

godolphins
08-25-2010, 06:46 PM
I have no solution to this problem, but it's obvious that state income tax can be a huge advantage for teams located in states without any income tax or low income tax vs those teams who play in states with high income tax... usually amounting into a few million more over the life of that contract, including endorsement money. Is this not a loophole in the system that circumvents the salary cap and gives "extra" cap space?

Florida and Texas teams (Miami, Orlando, Dallas, Houston and San Antonio) have the luxury of selling players the fact that they would be playing tax free, potentially earning millions more, while teams like Portland (11%), New Jersey (10.75%), New York (8.97%) and all the California teams (9.55%) are all at a monetary disadvantage. This can also be viewed as tax-free teams being able to offer 11% more, 10.75% more, 8.97% more etc...

There are 2 distinct advantages to tax-free teams:
1) The same valued contract, $10 million per year for example, would earn them more playing there vs high-tax teams. ($10 million in Orlando vs $9,113,000 in NY).

2) The player can be offered a slightly lower salary, make roughly the same amount he would make playing for a high-tax team, and leave the extra cap space to sign other players. Case in point: Miami Heat

In scenario 2, tax-free teams in theory could be granted up to $5.5 million more in cap space (depending on which team it is compared to). The players make the same money as they would in high-tax states, but the team now has that extra room to pursue more talent...

A lot of people will take this as me calling out Miami, but I'm not. Really they're just a prime example because of recent free agency. Orlando, Houston, Dallas, San Antonio all have that same advantage.

Do you guys feel this needs to be addressed in the new CBA or are you fine with the way things are? Obviously the tax-free vs high-tax teams will vote their own biased way.

State income tax rates (http://www.taxadmin.org/fta/rate/ind_inc.pdf)

You're just a knick fan who hate the heat

Giaps
08-25-2010, 10:26 PM
You're just a knick fan who hate the heat
Way to miss the entire basis of my post.

ChiSox219
08-25-2010, 11:04 PM
Are teams really competing on a level playing field? Since the tax rate is different in the different states and Canada, don't the teams in a more "tax friendly" state have an advantage over the other teams?


Yes they do. For example, since Florida has no state income tax, an offer from Orlando will offer a higher net income than the same offer from Los Angeles. However, the league added a regulation to help neutralize the tax disadvantage of Canadian teams. All teams are permitted to offer a signing bonus of up to 20%. For U.S. residents in Canada, this bonus is taxed at just 15%. Using this bonus, Canadian teams can nearly achieve tax neutrality.


I don't see why this rule cannot be expanded across the league.