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Dwight didn't (really) "take $30 mil less" [ESPN #sloppy]

Discussion in 'Houston Rockets: Game Action & Roster Moves' started by Rasselas, Jul 6, 2013.

  1. Rasselas

    Rasselas Contributing Member

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    Like the rest of the BBS, I'm overjoyed. Thank you Daryl Morey, thank you Clutch, and thank you R'hllor, the God of Light, to whom I have sacrificed the baby of a king.

    But I do have a pet-peeve with how the media is reporting this story.

    ESPN has a story with a headline "Dwight Howard bets it all on Rockets."

    I've seen a similar thing repeated elsewhere. Not once does the article mention that the Lakers contract ($118 mil) is for 5 years, and the Rockets contract ($88 mil) is for 4 years.

    Now, I'm no capologist, but even I can crunch the following numbers:

    118 / 5 = 23.6

    88 / 4 - 22

    And if you assume around 9% for California state income tax (that's sort of a swag, but probably not too far off), you get $21.2 million for Lakers, $22 million for Houston. (btw - Earlier, I had a typo saying "California sales tax," which, of course, makes utterly no sense. Thanks for catching.)

    So the "takes 30 million less" is only true if you assume that in Year 5, Dwight would earn NOTHING. True, I suppose that could happen if he gets hit by a bus, but all that really means is that a "fifth year is not guaranteed."

    Can't believe that on ESPN's homepage, the first article about Dwight leads with this fallacy, and never once bothers to mention the annual amounts.

    For all intents and purposes, the contracts are a wash.

    This isn't to take anything away from Dwight. I'm delighted. But he certainly didn't take some dramatic pay cut--or, arguably, any pay cut--to play with us.

    So... ESPN? Your reporting is sloppy and misleading.

    (Also, can we put Morey in charge of immigration reform, climate change, and solving our national debt? Or just declare him the nation's Supreme Ruler? At this point I'd be totally okay with that.)
     
    #1 Rasselas, Jul 6, 2013
    Last edited: Jul 6, 2013
  2. Fullcourt

    Fullcourt Contributing Member

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    To be fair, Dwight said $30 million as well.
     
  3. DreaMac

    DreaMac Member

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    Thats exactly what I have been thinking past few days. How do you assume he will make nothing in the fifth year. The only reason one would say that is that its "guaranteed" money. But if he can stay healthy he will definitely end up making more here after taxes.
     
  4. trueroxfan

    trueroxfan Member

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    They didnt say 30 mil more a year. The contract is worth 30 million more its just over 5 years. He is leaving guaranteed money on the table. In professional sports you don't always know when your next big payday is going to be. If you peak early in your contract and then dip in the latter years of the contract you won't attract any big offers. Dwight is leaving an additional max salary year on the table in the hopes that he will still be good enough in 4 years to attract a similar deal.

    Also, why are you calculating sales tax? Deduct the 13.3 percent millionaires state tax and it ends up being closer to 15 mil left on the table.
     
  5. AverageAgain

    AverageAgain Member

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    not state sales tax bro, state income tax
     
  6. Rasselas

    Rasselas Contributing Member

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    Dwight is only 27 years old. When the contract is up, he'll be 31. Yes, granted, if he has some catastrophic injury, then that 5th year is at risk. Barring that, though, it seems far-fetched that he wouldn't command the same rate. So assuming that in Year 5, he'll be able to make something close to $20 million--which certainly is plausible, if not probable--then the contracts are a wash.

    And if the Cali sales tax is more like 13%? Then that just further proves my point -- it makes the Rockets' annual offer, by comparison, richer.

    So while it's true that Dwight left a tiny bit of risk exposure in the eventuality of a career-ending injury, this shouldn't be framed as a financial sacrifice.
     
  7. Rasselas

    Rasselas Contributing Member

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    [slaps forehead.] Yes. That's what I meant. Will edit. Thanks.
     
  8. SamFisher

    SamFisher Contributing Member

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    That article also repeats the hackneyed Air worship canard that the Rockets only won in the 90s because of Jordan playing baseball.

    In 94 he was playing baseball

    In 95 he was playing basketball.

    He wasn't good enough to get past Orlando. Just like he wasn't good enough to make the Wiz relevant.
     
    1 person likes this.
  9. Illegal Machine

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    Can't he even opt out after the 3rd year and resign for the max?

    Being able to sign a long term contract, sooner, may mean he makes MORE money in the long run.
     
  10. knickstorm

    knickstorm Member

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    haha exactly! what is dwight howard? property?!?!

    that said, by the 4tth year, he'll ask for a new deal anyway. It's not like there's a big chance he wont be in the league 4 years from now.
     
  11. Yao4REAL

    Yao4REAL Member

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    Only smart people knows there is no difference in how much he make per year. Period.
     
  12. Rasselas

    Rasselas Contributing Member

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    Yeah, brain-freeze on my part. Typo. "Sales tax" should have read state income tax. (I would make the world's worst Tax Accountant.) Thanks for the catch. But... I stand by the spirit of my original point. If the Cali state income tax is 13%, then for at least the next 4 years, Dwight is doing better with this contract than the LA one.
     
  13. Rasselas

    Rasselas Contributing Member

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    Exactly. It's possible that a 4-year deal is even better for Dwight than a 5-year deal.
     
  14. Panda23

    Panda23 Member

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    omg now he's gonna get hit by a bus.

    THANKS OP.
     
  15. Rasselas

    Rasselas Contributing Member

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    yeah. which is sort of misleading on his part, too, but i'm still basking in the glow of his arrival and i won't hold that against him.
     
  16. wizkid83

    wizkid83 Contributing Member

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    $30 Million less GUARANTEED is $30 Million less guaranteed. Let's say he starts breaking down year 5, and or less would only pay him $15MM in year 5 instead of $30 MM, it makes a difference.
     
  17. CasaDolce

    CasaDolce Rookie

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    If he suffers a career-ending injury there's no year 5 income.

    If he gets traded to a team in another state he'll have to start paying state income tax.

    But I think in reality the $30M figure should be discounted.
     
  18. No Worries

    No Worries Contributing Member

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    Players play state income taxes in all of the states they play in.
     
  19. langal

    langal Contributing Member

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    And he averaged something like 30/5/5 in the 95 playoffs. Not only did he play, he performed at a very high level.
     
  20. DaDakota

    DaDakota If you want to know, just ask!

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    But 41 home games with state tax is significant to 41 home games without, playoff games too.

    DD
     

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