LeBron Can Make More With Heat Than Cavs
CNBC Sports Business Reporter
Let’s assume that reports are accurate and that LeBron James is headed to Miami.
As with every other team but his current team Cleveland, the Heat can offer James a five-year deal worth $95.5 million versus a six-year deal with the Cavaliers worth $124.5 million.
But if you match up what James’ salary would be for the first five years in Cleveland and the five years in Miami, you find that the Cavaliers are only offering him $4 million more.
That advantage gets erased — and actually gives the Heat the monetary edge over — when you consider the income tax difference. With the help of Aaron Merchak of the Tax Foundation, a non-partisan tax research group based in Washington, D.C., we crunched the numbers.
Playing in Cleveland, LeBron would face a state income tax of 5.925 percent, plus a Cleveland city tax of two percent.
Over the first five years of a new contract with Cleveland, James would give back $3,953,060 combined to the state and city for the 41 games each season he’d play at home. But James would have to pay none of that for home games in Miami since Florida doesn’t have an income tax.
Athletes have to pay income taxes to states that they play in on the road, so the games he’ll play away from home — whether he played for Cleveland or Miami — are essentially a wash.
But there are, on average, 11 away games per season where James would have to pay Ohio and Cleveland taxes. Why? Because he has to pay when he plays in the six areas – Florida, Texas, Washington D.C., Illinois, Toronto and Tennessee – that have no jock taxes.
That’s another $1,061,128 he’ll have to pay in taxes that he wouldn’t have to pay in Miami.
Sure, James would be guaranteed one more year if he signed with Cleveland, but unless the business of basketball supremely changes, you have to believe James will be worth as much at the end of the 2014-15 season as he is now.
So if you match up the five years in Cleveland to five years in Miami, and include Florida’s tax advantage, LeBron would actually make $1,014,188 over five years with the Heat than he would with the Cavaliers.
Of course, he might need that. Odds of getting rid of his estate in Akron at the price he built for are slim.
More on Courting Lebron:
- Market Bets LeBron Will Be A Knick?
- Five Things Will Happen Tomorrow With LeBron
- Why LeBron May Not Return to Cleveland
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