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LeBron James Didn't Go to Miami for the Taxes

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MIAMI - JULY 09:  LeBron James #6 of the Miami Heat is introduced during a welcome party at American Airlines Arena on July 9 2010 in Miami Florida.
MIAMI - JULY 09: LeBron James #6 of the Miami Heat is introduced during a welcome party at American Airlines Arena on July 9 2010 in Miami Florida.

There's been a lot of silly commentary in the wake of the LeBron James Comedy Hour and Cleveland Heartbreak since last night. Most of it has been faux outrage for his choice of taking an hour to make the announcement and the cruel way he went door-to-door all across the country and tied people to their chairs and stealing their remote controls, forcing them to watch. That, or how his choice of playing with other talented folks reveals some deep character flaw that puts him beneath Jordan and Bryant, who won hundreds of championships while playing with teams of fifth graders or something. As someone who didn't catch ESPN's coverage and doesn't care for the state of Ohio, I was more than willing to just ignore the whole thing.

The dumbest argument, however, is that taxes played a role in his decision. I've seen this a lot, and it mainly shows an ignorance in the way states charge taxes. The observation, of course, is that Florida, designed as it is to cater solely to the retirement set, charges no income tax, while Ohio's highest rate is 5.93%. OMG! He's getting a windfall!

Except he's not. The New York Times comes the closest to explaining this, but as someone who's done the tax-in-multiple-states thing, I can elaborate. Most states charge tax on money earned within their borders, so every state an NBA team hits, the players have to pay taxes in that state. That's 22 states and one Canadian province; accountants love athletes. I'm not about to crank through 30 NBA schedules to figure everyone's effective tax rate, but I'm willing to put together a basic model. 

The chart below has the top tax rate for each state (LeBron's salary should be big enough to ignore progressive tax rates) and what the effective rate would be. The model taxes 42 of the 82 games at the home state rate, and the other 40 at the average rate for the remaining 29 teams. Why 42 and 40, and not 41? Well, there's the strange case of Washington, D.C..

Unlike the other states, D.C. is prohibited by federal law from taxing residents from other states. That's what happens when you don't have Congressional representation and Maryland and Virginia really don't want to lose the tax money that goes to the folks who commute into the district. So games against the Wizards are taxed at the home team's rates, presumably. Also, Wizards' players will be taxed wherever the live, hence Maryland and Virginia making the chart.

Taxrates_medium

Once the numbers have been run, the rates aren't that different, unless you're stranded in Toronto. (Now Chris Bosh, he's making out like a bandit.) Now this doesn't factor in local rates, or whether they're split by time spent in the state versus games played. Although in the latter case, assuming James keeps a house in Ohio where he's always left, the state will get their tax money there. The whole concept is silly. James hit Florida for a number of reasons, from money to more enjoyable work to championships. Taxes didn't make the list.