Dwight Howard’s Financial Incentive Could be in Texas
Forbes Magazine tax writer Tony Nitti of WithumSmith+Brown’s National Tax Service joined The David Baumann Show Friday morning to divulge some fascinating news about Dwight Howard’s financial incentive to take a free agent contract in Houston or Dallas as opposed to Los Angeles.
Let’s forget the fifth season of a potential deal in L.A., because Howard will almost certainly opt out after the fourth year in order to pursue another maximum-level contract, so the Lakers offer would total 4-years, $91M (as a portion of the 5-year, $118M contract that includes 7.5% annual pay raises).
Houston, Dallas, or any other NBA franchise could only offer 4-years, $87M with 4.5% annual pay raises due to the restrictions of the latest collective bargaining agreement. However, there is no income tax in the state of Texas.
California boasts the most bloated state tax in the U.S. at 13.3%.
Therefore, Dwight Howard would be forced to pay approximately $12M in taxes over a four year stretch in Los Angeles, whereas he’d only pay $600K in taxes over that same time frame in Houston or Dallas.
Nitti told Sports Talk Florida that Dwight Howard would retain $8M more over four years in Houston or Dallas in comparison to Los Angeles. He would walk away with approximately $86M in Houston or Dallas as opposed to $78M in Los Angeles over the four-year time frame.
Other factors to consider: Cost of living and lifestyle, among others.
All things considered, could California’s exorbitant taxes lead to a larger issue in sports? Could we now see superstars from all of the major sports “think twice” about accepting a contract in Cali?
Read Tony Nitti’s column in Forbes.
LISTEN TO THE INTERVIEW WITH TONY NITTI:
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Dwight Howard's Financial Incentive Could be in Texas by David Baumann