Not sure where this belongs, so here it is. Let me preface this by saying, quite a few assumptions had to be used. If you don't want to read all of this, the bottom line is: 1) I estimate that Howard will save about $3.1 million in state income tax over 4 years by signing in Houston versus LA 2) He will, obviously, easily make that up in endorsements 3) He will probably want the protection of the 5th year 4) He has his publicity in LA versus Houston Does playing with Harden, versus an aging Kobe outweigh this? If Houston gives him a better chance at a championship, does this mean enough to him? Here is some background information used to make the calculations: Spoiler People often talk about how much money a player would save by playing in Texas versus another state with a state tax. Most seem to think that this state tax is deducted entirely from a players salary, but that is not the case. A player only pays what is known as a "Jock Tax". This means they pay tax based on games that are played in states with state income tax. How is this calculated? It is complicated, but it is based on what are known as Duty Days. These are the days players spend in specific locations and include preseason, regular season, and playoffs. In order to calculate the "Jock Tax" you need to know the total number of duty days, the number of duty days in a specific location, the state tax at that location, and the player salary. Here is an example: Total duty days: 160 Specific duty days (we'll use Portland): 2 State Tax: 9.9% Player Salary: $1,000,000 So in this example, the player would owe $1,237.50 in Jock Tax (2/160*9.9%*1,000,000) for the road trip to Portland. You would calculate this for each game that takes place in a state with a state tax. There are 3 exceptions. The Raptors and Wizards have a state tax, but do not charge a jock tax (so no tax for visitng players). Also, if you're playing in Chicago, and a jock tax was paid in your previous game, no jock tax is due. Assumptions: Spoiler I hated to do this, but basically had no choice. 1) I used the schedule from this year for each year that I calculated Howard's salary. 2) I did not include the post season. I figure it will, for the most part, be a wash because whichever team Dwight is on will likely have more playoff games. Although Houston will have a very small advantage due to more home games in Texas versus California. 3) I went through each teams schedule and used the dates to make my best guess on the number of days each team spent in each city. 4) In order to make it "even" I assumed LA would sign Howard to an additional 3 year max extension (105% of his prior contract after the 5 year contract) and Houston would sign him to a 4 year extension, same as above. This would give each team 8 years of his services. Yearly Salary after removal of Jock Tax: Original Extension: Spoiler LA 2013-2014 $18,309,465 2014-2015 $19,682,675 2015-2016 $21,055,885 2016-2017 $22,510,173 2017-2018 $23,802,304 Total $105,360,501 Houston 2013-2014 $19,826,040 2014-2015 $20,718,212 2015-2016 $21,610,384 2016-2017 $22,502,555 Total $84,657,191 Assuming Howard signs additional extensions: Spoiler LA 2013-2014 $18,309,465 2014-2015 $19,682,675 2015-2016 $21,055,885 2016-2017 $22,510,173 2017-2018 $23,802,304 2018-2019 $24,992,419 2019-2020 $26,866,851 2020-2021 $28,881,865 Total $186,101,636 Houston 2013-2014 $19,826,040 2014-2015 $20,718,212 2015-2016 $21,610,384 2016-2017 $22,502,555 2017-2018 $23,627,683 2018-2019 $25,399,759 2019-2020 $27,304,741 2020-2021 $29,352,597 Total $190,341,971
huh? how is cost of a living a factor? For how much he will make, the cost of living differences will be negligible to him.
No, a 30 mil house in LA could be 8 mil or less in Houston. That's a huge difference even for his total salary after all kinds of tax.
great write up. Most people assume the "no state income tax" issue means a great deal to a player but less than $900,000 a year to Dwight Howard is like one less paint job on his house.
Terrific work. I particularly liked that you broke out Dwight's career earnings beyond 2017 or 2018. That's what so few people seem to grasp -- this "leave $30 million on the table" logic from the media is disingenuous drivel unless there's a serious risk of this being his last max contract. I don't think that's very likely, at all.
And can't you just buy a dump of a house in nowherevillle,Texas, call it your primary place of residence and reap the benefits anyways?
http://finance.yahoo.com/news/professional-athletes-big-league-tax-071447565.html For Howard, his endorsement with Lin/Harden would be huge part of his income. Due to the global appeal, it should be not much less than if he'd stay in LA. But he'll say a ton of money in tax playing and living in Houston.
But it's not like the extra money spend in housing in LA is being flushed down the drain. Sure it costs more, but it sells for more down the road and also historically LA metro's housing appreciation have been significantly higher than that of Houston metro's.
That's true. I think Howard would make comparable money overall whether he chooses Lakers or us. But for a star like him, the preference would be different. I'm average Joe, and I'd be happy with either choice. But I'll admit if I could be as talented as DWH, why wouldn't I want multiple rings AND the money? He should already know how extremely difficult to win in this league, and realistically only Houston can offer an opportunity to be a contender again now that Kobe is older and injured.
LA has the glitz, the glamor, the media attention, the endorsements, the lifestyle, and the fame that every big time superstar athlete wants. What LA might not have over the first 1-2 years of his next contract is the ability to contend for championships. However, it all depends on how important that is to him. LA will get their second star sooner or later. It just depends on if he wants to wait for it.
How much did it help...exactly? And if there was a huge difference I bet it was more Griffin then the market. Clippers were a black hole until griffin landed there. Harden and Howard with Lins asian appeal would be as good as LA without kobe if not better. I mean we are the 5th largest media market. Everyone always acts like we are Milwaukee or something. Add the asian demographic that spans teams market. Do you not remember lin in toronto and lin at the warriors. We have lin and Harden and Howard we are the most marketable location outside of south beach......................which is by far a smaller media market pre-decision...fyi.
I'm glad you mentioned both sides. It's worth noting that NY also had the glitz, glamour, media attention, endorsements, lifestyle and fame, yet they went about 10 years without being able to attract a superstar (including LeBron). Why? Because they weren't winning. It took overpaying the hell out of Amare Stoudemire to make them a preferred destination for the likes of Carmelo. In a league where stars are increasingly "teaming up", guys like Dwight Howard don't want to go at it alone. Dwight had his team in Orlando. LeBron had his team in Cleveland. These guys want to win, more than you think. True relevance comes from playing meaningful games in June. Durant and Westbrook are two of the most known and marketable stars in the entire NBA, and they play in Oklahoma f'n City. It's about the winning.
