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Rockets can offer more money to Melo than Knicks

Discussion in 'Houston Rockets: Game Action & Roster Moves' started by adagio75, Jul 2, 2014.

  1. adagio75

    adagio75 Member

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    I found this great article that breaks down how New York's State and City Taxes can effect Melo's Potential Salary offer from the Knicks vs no State Taxes in good ole Texas. Lock up if this has been previously posted. :grin:

    http://www.forbes.com/sites/anthonynitti/2014/06/23/how-state-taxes-could-play-a-role-in-carmelo-anthonys-landing-spot/

    So where will Anthony land? The door has certainly not closed on the Knicks, who offer three things to Anthony no other team can—the chance to play in his home town, for a team led by an 11-time champion in Phil Jackson, and yes, for far more money than anyone else can pay him. Under the collective bargaining agreement, the Knicks can offer Anthony a five-year, $129 million deal. Should ‘Melo flee Madison Square Garden, however, the most he can earn from another team is $96 million over four years. That’s $33 million solid reasons to re-up in New York.

    But with a rookie coach in Derek Fisher, limited salary cap room, and even less surrounding talent, the Knicks do not present an opportunity for Anthony to make a run deep into the playoffs any time soon. Further diluting the appeal of the Big Apple, that extra $33 million the Knicks can offer isn’t all it’s cracked up to be. Why? Because of New York’s state and city taxes, among the highest in the country.

    As a resident of New York City, Anthony would pay a top state tax rate of 8.82% and an additional 3.876% NYC tax on all of his contract earnings. That’s over 12.6% in state and city tax Anthony will pay on a $129 million deal, shaving over $16.25 million off the top and reducing the pre-federal tax value of the max contract to $112.75 million. Of course, Anthony’s estimated annual endorsement earnings of $8 million would also be subject to this 12.6% state and city tax.

    There’s always the fairly realistic possibility that even if Anthony does sign with the Knicks, at 34-years old in 2018, a still-healthy Anthony would opt out of the fifth year of his deal in hopes of signing one final large contract. If that were to happen, then the value of Anthony’s Knicks deal would be reduced to approximately $100 million over four years. Take 12.6% for state and city taxes, and returning to NY would net Anthony $87.4 million before federal taxes prior to opting out in 2018.

    Couple these prohibitive taxes with New York’s rather uninspiring personnel, and it’s not far-fetched to think Anthony is on his way out. But to where? Rumors abound that Anthony is focusing on three teams: the Miami Heat, Houston Rockets, and Chicago Bulls. Let’s take a look at the pros and cons of each locale, including the potential state tax implications.

    Miami Heat

    Four straight Finals appearances. No state income taxes. And it is currently home to the best player in the world, LeBron James. But it ain’t going to happen. There’s no way James, Dwyane Wade, and Chris Bosh all agree to opt-out of their current contracts to take less-than-maximum deals a second time, solely for the sake of freeing up room to sign Anthony.

    Not to mention, the Heat don’t need Anthony. They didn’t get embarrassed by the Spurs because they can’t score on the offensive end, and let’s be honest, with Anthony, scoring is all you’re getting. Rather, Miami was eviscerated in one of the most lopsided series in Finals history because Bosh disappeared, Wade never showed, and three years of having to pay the “Big Three” so limited the Heat’s ability to add help at other positions that they were stuck adding low-cost, high-risk reinforcements like Greg Oden and Michael Beasley who didn’t pan out.

    It would make little sense, then, for the Heat’s three stars to take a second round of discounts in order to add a player who doesn’t make them appreciably better, particularly when it would only further limit the team’s ability to add useful complimentary pieces.

    From Anthony’s perspective, in order to fit under the salary cap along with the Heat’s three incumbent superstars, he would have to take less than the $96 million he’s permitted to receive from a new team. Would he be willing to do that when he’s already left $23 million on the table by opting out of his Knicks deal for 2015? Not likely.

    Houston

    Last year, when Dwight Howard was faced with the similar choice of opting in to his final year of a contract with the L.A. Lakers or opting-out and heading elsewhere, I wrote a column explaining that by heading to Houston, Howard could actually earn more over the same four-year period it was anticipated he would play under his new deal (before, as discussed above for Anthony, he would likely opt-out prior to the fifth year to seek one more mega-deal) in Texas than he would in California. The reason, of course, was state taxes.

    Howard ended up doing just that, and the tax savings that led him to flee L.A. – a move once considered sacrilege, particularly for a big man – should similarly serve to attract Anthony. Should he sign with and relocate to Houston, because Texas has no state income tax, Anthony’s earnings would only be taxed to the extent he practices or plays games outside of Texas.

    As a result, Anthony would pay no tax on the 42 games the Rockets play at home. Sweetening the deal further, as a member of the Southwest Division, the Rockets play two road games apiece against the San Antonio Spurs and Dallas Mavericks. And if you’re one of the 6% of public school graduates who understand basic geography, you’ll recognize that those teams are also located in Texas, and thus that income also escapes tax. Tack on road games in Miami and Orlando and Memphis—Florida and Tennessee also have no income tax–and the salary earned from 49 of Anthony’s 82 game days would largely go untaxed at the state level.

    For the sake of argument, let’s assume that the NBA season comprises 270 duty days, from the beginning of training camp until the playoffs mercifully conclude in late June. Let’s further assume that the average state income tax rate in those states the Rockets compete in outside of Texas is 5%.

    We’ve already determined that Anthony will play 49 games in states with no income tax, meaning he will play 33 games in states with a tax. If we assume another 33 of travel days allocated to taxable states –purely a shot-in-the-dark estimate — and ten playoff games located in taxable jurisdictions, we get a total allocation of duty days of 76/270, meaning 28.1% of Anthony’s total earnings of $96 million over the life of his contract – or $27.0 million — will be subject to state income tax. At an average rate of 5%, Anthony will pay approximately $1.35 million of state income tax over the four-year period. That would reduce the value of the deal to $94.65 million before federal taxes, or nearly $7 million more than Anthony would earn if he re-signs with the Knicks and then opts out after year four. In addition, any future endorsement dollars earned by Anthony would escape state income tax.

    The problem, however, is one of fit rather than finances. In a league that’s already derided for its often-laughable defensive efforts, can you imagine James Harden and Carmelo Anthony on the floor at the same time? Opposing shooting guard/small forward combos would go for 60 points a game.

    In addition, one of the primary reasons Howard was willing to leave the Lakers was because he hated the way Kobe Bryant dominated the ball. With Harden and Anthony sharing(?) touches, will Howard ever see the ball in the post? And if Howard’s tenure in L.A. taught us nothing else, it’s that a disinterested Howard is an awful Howard.

    Chicago

    The Bulls appear to be the leader to land Anthony, and it would be a good fit from both a financial and basketball perspective. While Illinois isn’t the tax haven that Florida or Texas is, its flat individual tax rate is a mere 5%. As a result, the total state tax liability on a $96 million deal – ignoring the road games played in higher-tax jurisdictions like New York or California – would be approximately $4.8 million, reducing the net value of the deal before federal income taxes to $91.2M, or $4 million more than Anthony stands to earn if he re-signs with the Knicks and then opts out after four years. Anthony’s estimated $8 million of annual endorsement income would be subject to the same 5% state tax rate, saving him 7.6%, or $600,000 annually in state income tax on his endorsement earnings.

    To summarize the impact of state and city taxes on Anthony’s potential landing spots, his net before-federal tax earnings in each situation would be as follows:

    table

    From a basketball perspective, if there’s one coach that can mask Anthony’s defensive indifference deficiencies within a system, it’s Tom Thibodeau. And Anthony gives the impotent Bulls what they desperately need, scoring punch to go along with the returning Derek Rose, emerging Jimmy Butler, and ever-solid of Joakim Noah.

    The real appeal of the Bulls when compared to the Rockets, however, is that they’re not in the Western Conference. After all, the only thing pairing Dwight Howard with James Harden earned the Rockets in the brutally competitive West was a first-round dispatching at the hands of the younger Portland Trailblazers. The lesson, of course, is that nothing is a given in the West; a team can win 58 games and get ousted five games into the postseason.

    In the East, however, no team would scare a Bulls team with Anthony in the lineup. The Heat are in flux with James, Bosh and Wade all having the option to opt out and become free agents. And even if they stick together, they’re fresh off being exposed as having tired legs and an over-the-hill Wade, reducing the Big Three to the Big One-And-A-Half. The rest of the Eastern Conference is pedestrian at best. Pair Anthony with Rose, Noah, Butler and Carlos Boozer, and they immediately become the co-favorites to reach the Finals, a place Carmelo has yet to sniff in his first ten years.

    And that would make leaving $23 million on the table worth every penny.
     
    1 person likes this.
  2. ashleyem

    ashleyem Member

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    The biggest problem is we cannot offer him the max contract
     
  3. saleem

    saleem Contributing Member

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    All true apart from a hobbling Rose. It's up to Carmelo to make his move.
    Dallas is the dark horse here. Hope he choices Houston.
     
  4. shastarocket

    shastarocket Contributing Member

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    Good find, it should also be noted that Mark Cuban has already stated that he is not giving out max contracts
     
  5. Scolalist

    Scolalist Member

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    Unless it was a S&T.

    Knicks wouldn't mind some 2nd rd picks
     
  6. Liberon

    Liberon Rookie

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    Harden to the Knicks it is....:grin:
     
  7. nykb17

    nykb17 Member

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    I am afraid the Melo ship has sailed with Asik contract being traded. Unless you want to trade Harden with Lin...we don't have enough contracts to pair with Lin for Melo. I only want Harden for Melo if we are getting LeBron as well. I want a Big 3 not another version of Dwight and another star.
     
  8. megastahr

    megastahr Contributing Member

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    No..... That's not correct
     
  9. Fullcourt

    Fullcourt Contributing Member

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    Great, another Melo thread to keep track of.
     
  10. benchmoochie

    benchmoochie Contributing Member

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    Dallas's window is tied to Dirk and closing fast. I think they have about a 2 year window left.
     
  11. J.R.

    J.R. Contributing Member

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    Removed
     
    #11 J.R., Jul 2, 2014
    Last edited: Jul 2, 2014
  12. HTM

    HTM Member

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    Bro, who pays taxes?
     
  13. ROXTXIA

    ROXTXIA Contributing Member

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    I really don't know what planet you're on when it comes to contracts and trades. I'm thinking too of your posts of, "If the Rockets trade Asik and Lin and Parsons and three future first round picks to my actual favorite team [nykb17?], they can get Melo!"

    The Rockets certainly have another team ready to take Lin's contract. Asik will be gone. We can clear the cap space.

    This was never about having to go hat in hand to the Knicks for a trade. That's what the Bulls are counting on.
     
  14. Jpripper88

    Jpripper88 Member

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    You are mistakenly afraid.
     
  15. chandlerbang21

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    Melo to bulls
     
  16. Possum

    Possum Member

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    GREAT POST!!!!! Who needs Woj when we have posters like you!!!!! Keep up the good work!!!!!!
     
  17. pugsly8422

    pugsly8422 Contributing Member

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    Who's Derek Rose?
     
  18. Remii

    Remii Member

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    When a player is making over $100 million _ do you honestly think no state tax is really at the top of the list for these guys...???

    And even with the no state tax _ NYC is still offering more money.

    And Fisher will probably be a better coach than McHale.
     
  19. ross84

    ross84 Contributing Member

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    I don't won't Anthony.
     
  20. Pieman2005

    Pieman2005 Member

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    I think some of you people miss a Lowry/Martin/Hayes lineup
     
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