Saturday, July 6, 2013

Seven-time NBA all star Dwight Howard yesterday signed with the Houston Rockets for the maximum free agent contract permitted under the NBA's "Larry Bird Rule" -- $87.6 million over four years (4.5% annual increases over his existing contract). He spurned a much higher offer from the L.A. Lakers -- $118.0 million over five years (7.5% annual increases). Several tax folks have run the numbers and concluded that Howard will receive more after-tax income by signing with the Rockets rather than the Lakers, based on California's 13.3% top marginal income tax rate and the absence of a state income tax in Texas, after taking into account the application of various state and local "jock taxes."

(Hat Tip: Tony Nitti.)

Update: Slate: After Taxes, Did Dwight Howard Take a Pay Cut By Moving to Houston?

https://taxprof.typepad.com/taxprof_blog/2013/07/did-taxes.html