High state income taxes once again haunt a California NBA team

18 Oct, 2013 by Chris Reed

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In July, fans of the Los Angeles Lakers took a kick to stomach when free agent Dwight Howard, arguably the league's best center, signed a four-year, $88 million contract with the Houston Rockets for $30 million less guaranteed money than he was offered in a five-year deal to stay with the Lakers. On Cal Watchdog, I broke down how California's extremely high state income tax on high earners made it completely understandable as to why Howard would bolt for Texas.

The key is a recent development that San Diego small-government activist Richard Rider detailed in the Wall Street Journal:

“Until 2013, state income taxes were deductible for federal income tax purposes. Starting in 2013, for the really rich, this deductibility largely goes away (as does deducting property taxes and many other deductions). For people with over $2 million of income, they lose 80% of such deductions.

“With Proposition 30 passed in November, CA has raised its income tax on the wealthy by 29%. The combined tax increase is breathtaking. Do the math, and you find that in 2011 the net CA income tax for [very high earners] was 6.7%. In 2013 [their] CA income tax is 12.3% — an increase of 83.6%.”

Another star center may flee Golden State

Now it longs like one more former all-star center may flee the Golden State over taxes — specifically the Golden State Warriors.

Aussie Andrew Bogut, who will be a free agent after this season, is being courted by several teams. And while he says he loves living in the Bay Area, he also says, “California state tax plays a big part in things.”

Proposition 30's increase in sales and income taxes was approved by voters in November 2012 who bought the absurd idea that Californians are undertaxed. Dwight Howard and Andrew Bogut don't agree.

As the payroll clerk said in “Raising Arizona,” “The government do take a bite, don't she?” But in California, if you're a high earner, it's both the state and federal government taking big bites.