Last night, sports fans across the country tuned into ESPN at 9 P.M. to witness the much-anticipated decision of what city NBA icon LeBron James would soon call home. At 25, James has already accomplished what few Americans will in their lifetime bringing in $68 million in NBA income, a number that fades in comparison to the $200 million he has earned in endorsement deals. In the end, it came down to the final five: the Cleveland Cavaliers, the Chicago Bulls, the Miami Heat, the New York Knicks and the New Jersey Nets. Crowded sports bars and crowds were silenced as LeBron James announced that he would now be proudly playing alongside Dwyane Wade and Chris Bosh for the Miami Heat.
A saying that as proved to reign true for more than real estate, “It’s all about location, location, location,” could emerge as the true motivating factor in his decision. While many only see the effect location can have on endorsement deals, LeBron James has is a prime example of just how false this statement can be. Despite playing for the Cleveland Cavaliers, LeBron still managed to become the most sought-after NBA player by top companies.
So what impact does location really have on his decision? State income taxes. Even superstar LeBron James isn’t immune from the reality of taxes. Florida, along with Nevada and Texas, are among the few states that do not have any state income tax. On the other hand, New York and New Jersey represent another extreme with some of the highest income taxes in the country. Even signing with the Miami Heat though won’t leave James completely off the hook when it comes to paying state income taxes, as taxes are generally paid based on where the game takes place.
While playing for Cleveland, James paid around $894,000 in state income taxes. Here are some quick figure estimates on what his bill would have been playing for some of the other contending teams:
- New York Knicks: $1.5 million
- New Jersey Nets: $1.15 million
- Miami Heat: $437,000
Even disregarding other factors that would obviously play a role in his net income such as property taxes, the numbers speak for themselves. It is estimated that assuming a 5-year contract worth nearly $100 million, Lebron would end up paying $12.34 million less by playing for Miami over New York. Even heartbroken Knicks fans cannot deny the appeal there.
With his decision to play for the Miami Heat finally made public, LeBron James admitted it was one that did not come easy. In the end, James said that he needed to choose the team that would be the best for him in the long run and that had the best chance of winning but it’s hard to imagine that the additional $12 million in his pocket did not play a role.