NBA center Dwight Howard's decision to join the Houston Rockets rather than re-sign with the Los Angeles Lakers will pay dividends beyond the court, according to Americans for Tax Reform.
Despite the possible offer by Los Angeles of a 5-year, $118-million contract, the 4-year, $88-million deal Howard will reportedly sign with Houston will net him $2.1 million more overall thanks to no-state-income-tax Texas:
Team
Total
Tax Burden
Total
Tax Liability
Annual
After-Tax Earnings
Houston Rockets
43.4%
$9.6 million
$12.4 million
Los Angeles Lakers
56.7%
$13.5 million
$10.3 million
For illustrative purposes, the total tax burden is comprised of the top marginal federal income tax rate of 39.6 percent plus the 3.8 percent Medicare surtax plus the top marginal income tax rate of California (13.3%) and Texas (0%). Additionally, figures based on estimated annual pay from Lakers ($23.8 million per year) and Rockets ($22 million per year).
Additionally, if Howard were to remain in Los Angeles, he would have to hand over his paycheck for five and a half home games to the state of California to cover his state tax liability. By signing with the Rockets, Howard does not have to worry about the state committing a flagrant foul against his earnings.
The former first overall draft pick agreed to join the Rockets under the impression he was losing a lot of money to seek his first NBA title.
"[A championship is] the priority. That's the priority. [Shoot], I'm betting $30 million on it," Howard told ESPNLosAngeles.com in a phone interview Friday night.
Turns out that's not the case.