Could state income tax be a possible reason why LeBron James signed with the Miami Heat over other teams like the Cleveland Cavaliers, New York Knicks, New Jersey Nets, and Chicago Bulls?
Why would LeBron James sign with a team in a state where he would have to pay millions in state income taxes, when he could play for the Miami Heat in Florida where there is no state income tax because it’s banned in Florida’s state constitution, unlike the states of Ohio, New York, New Jersey, and Illinois. According govspot.com seven states have no income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Two others, New Hampshire and Tennessee, tax only divided and interest income.
In a July 1 blog post by the New York Post breaks down the amount of money LeBron would pay in taxes in New York as opposed to Florida.
“If LeBron James goes to the Miami Heat instead of the Knicks, blame our dysfunctional lawmakers in Albany, who have saddled top-earning New Yorkers with the highest state and city income taxes in the nation, soon to be 12.85 percent on top of the IRS bite. There is no state income tax in Florida.”
“On a five-year contract worth $96 million — what he’d get from the Knicks or the Heat — LeBron would pay $12.34 million in New York taxes. Quite a penalty for the privilege of working in Midtown.”
In an article done by Businessandmedia.org, Kyle Gillis breaks down the tax situation in the states of Ohio and New Jersey.
“New Jersey and Ohio, the other reported frontrunners to attract James, also have state income taxes, but they are not as high as in New York. Based on a $96 million contract, James would pay $5.69 million in state taxes if he re-signed with the Cleveland Cavaliers. If he signed with the New Jersey Nets, James would pay $10.32 million in state taxes.”
“Last week, the Pew Center on the States named Illinois one of the 10 most financially troubled states in the nation” a quote by Christopher Nichols in a November 2009 article from Metroplannig.org . According to Nichols the stat doesn’t pays it’s bills ,” Essentially the state has run a deficit every year since 2001, dodging the constitutionally required balanced budget by delaying payments from one fiscal year to the next to Medicaid vendors, such as doctors, pharmacists and small business owners that provide social services”. There is also no plan to fix this problem, passing reforms that would raise taxes and not lower them”, and this practice also affect the state as a whole, ” The state’s poor fiscal practices also have caused its credit rating to drop, meaning higher interest payments on loans and bonds. When the state has gigantic revenue problems, it doesn’t send required payments to universities, Southern Illinois hasn’t received a state payment since July”. It would clearly be a bad move for James to move to a state with such debt.
All the writing in quotations are words from Christopher Nichols.
As For Cleveland
I don’t blame LeBron for not signing with the Cavaliers, according to Peter A. Brown of the Wall Street Journal, “Ohio’s piece of the American pie has been shrinking since the end of World War II” this is a bold but true statement by Brown. The lack of population growth, job loss, loss of residents, between 1950 and 2000 along with its state tax burden its clear that Ohio is going through a lot of problems clearly not appealing to a NBA star of LeBron James’ stature.
“For most of the 20th century, Ohio, along with neighboring Michigan, was the symbol, of the American manufacturing base. The state prospered as a blue-collar economy. Gov. Ted Strickland took office at the beginning of 2007 promising to resurrect the state’s economy, but Ohio has lost 376,000 jobs since then.” – Wall Street Journal
It’s clear that LeBron will net more money in Florida with Ohio having a top income tax rate of about 6%, and Cleveland having a 2% levy.
Looks like LeBron got a good deal, 2 superstar team mates, and no state income tax.