Despite his two World Series losses, many are assuming that the Yankees will bid top dollar for Texas Rangers pitcher Cliff Lee in free agency.

Brad Mangin | MLB Photos | Getty Images Cliff Lee, Texas Rangers

Lee is expected to earn north of $100 million for a five-year contract, which might go higher if it turns into a bidding war.

But taxes have to figure in somewhere.

Texas of course does not have a state income tax. So assuming Lee moves residency from Arkansas, which has a top individaul tax rate of seven percent, to somewhere in Texas, he'd save a significant amount of money over living in New York.

How much? Well, it depends on if his residency is in New York City or just in the state.

We called up Robert Raiola, an accountant with Van Duyne, Behrens & Co. whose clients include athletes. We told him to assume that Lee signs a five-year contract worth $120 million with the Yankees and then becomes a New York state or New York City resident.

Raiola told us that if Lee was signed by the Yankees and moved to New York state, he'd pay New York state approximately $10.76 million over five years. If he lived in New York City -- he'd have to pay a 3.65 percent city tax on top of the top state income tax rate of 8.97 percent, which means he'd pay a combined $15.13 million over five years to New York City and state.

So how much less could the Rangers offer Lee and still have Lee make the same amount of money?

On the assumption that Lee would live in Texas, he'd pay no state income tax. He would however have to pay the so-called Jock Taxes, an attempt by cities and states to fill their coffers during tough times by imposing non-resident income taxes when players come to town.

Raiola said Lee would pay the Jock Tax on approximately 75 percent of the team's 81 road games each year, which would be 60 days out of the

225 days worked by Lee each season. Raiola says those Jock Taxes then work out to $2.25 million over the course of a five-year contract. Lee would pay Jock Taxes as a Yankee, but Raiola assumes that those taxes would offset his liability to New York state or city.

So assuming the Yankees offer Lee a five-year, $120 million contract and he establishes residency in New York, Raiola says the Rangers could offer him $111.5 million (if he takes up residency in Texas) and it will be the same deal.

If Lee were to live in New York City versus somewhere in Texas, the Rangers could offer a five-year, $107.2 million deal against the Yanks' $120 million and it would work out to the same net dollars for Lee, Raiola said.

Paying more state tax will result in Lee paying slightly less in federal taxes, but it's likely insignificant, Raiola said since Lee wouldn't be paying any income tax on either his endorsement deals or investments as a Texas resident.

Questions?  Comments?