NBA Championship goes to no-income-tax Florida

June 22, 2012

By John Seiler

Hail the tax-free champions!

Yesterday LeBron James won the NBA championship for the Miami Heat.

Back when James jumped from the Cleveland Cavaliers to the Miami Heat a couple of years ago, one reason cited was that Florida has no state income tax. So he largely avoided the state income taxes of Ohio (5.925 percent top rate), New York (8.82 percent) and California (10.3 percent, plus whatever might be added by voters in November).

Under IRS rules, you pay state income taxes in the state in which the game was played. So James still pays California income taxes when he plays here, New York income taxes in New York, etc. But home games in Florida are exempt. So are endorsement deals, which will become even more bountiful now that he has won the championship some critics said he was too “selfish” to win because he didn’t want to get gouged on taxes.

According to Sports Illustrated, LeBron James slam-dunked $44.5 million last year. Of that, $30 million was in endorsements. And of his $14.5 million salary, probably about $9 million was exempt from state taxes; about $5.5 million was earned in states with income taxes. So he still paid something to California and New York.

But here’s the key: By living in Florida, he also paid little or no California (or other state) sales, property and other taxes. That meant California (or another high-tax state) probably missed out on hundreds of thousands of dollars in tax revenues.

And the people in California (or another high-tax) state who work in real estate, car dealerships, etc., who didn’t get James’ business also didn’t pay taxes on the business they lost.

Remember that when politicians, such as Gov. Jerry Brown, say that raising taxes doesn’t kill jobs.

OK, the Lakers have won a lot of championships in recent years, including five of 13 since 2000. That’s impressive.

But of the last 10 championships, six have been won by teams in states with no income tax: San Antonio in 2003, 2005 and 2007; Dallas in 2011; and Miami in 2006 and 2012. That’s 60 percent for the no-tax states.

Also, in the last two years, the runner-up teams were Miami last year, and Oklahoma City this year. Oklahoma is getting rid of its income tax. So that’s all four teams in states with no state income tax now or in the near future.

Stanley Cup

True, the Los Angeles Kings won Hockey’s Stanley Cup this year. Good for them. And the New York Giants won the Super Bowl; they play home games in New Jersey, where the top state income tax rate is 8.97 percent. But endorsement deals for those teams are much less than for what James gets.

There are no NHL players among the players in the top 10 for salaries and endorsements. Hockey is much less popular in American than basketball.

Football scored two in the top 10 list: Matt Ryan of Atlanta, $32.7 million (6 percent top Georgia state income tax), who has won no championships; and Tom Brady, $30 million (5.3 percent in Massachusetts), who last won a championship in 2005.

Topping the list are two golf guys, Tiger Woods, $62.3 million and Phil Mickelson, $61.2 million. Tiger moved from Taxifornia to Florida years ago. Mickelson is selling his house in Santa Fe Springs.

In the top 10, the only baseball player is Alex Rodriguez of the New York Yankees, at $36 million, just $4 million of it from endorsements. But Albert Pujols of the Anaheim Angels (not of Los Angeles) might top that for 2012.

Recent World Series winners have been from high-tax states: St. Louis in 2011 (6 percent Missouri state income tax), San Francisco in 2010 and the Yankees in 2009. However, baseball rosters, like those in football, are much larger than those in basketball and hockey, meaning mediocre players are much more important to a team’s success. And a utility infielder doesn’t worry about state taxes. He just wants to be in The Show.