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Six year contract....$1.2 mill. Need to make $2 mill to bank the $1.2. I didn't include deductions and I didn't include cost of living factors either. As far as my Lebron example, I included NYC taxes and Obamas progressive federal tax plan, yet to be voted on.How are you coming up with your figures?
Massachusetts is 5.3% tax and New York State is 6.85%.
5.3% tax on $36 million (taking out the 1.5 million paid to Branch's agent) is 1.8 million.
So, if the Patriots and Deion were $500k apart over 6 years, the tax ramification would mean they were an additional $300k apart, less when you realize that the state income tax gets deducted from the federal tax, so that $1.8 million he pays to Massachusetts saves him ($1.8 x 35% top Fed tax rate) $630k of Fed taxes, so the total additional losses per year because of state taxes are $200k.
One thing I know, and this is coming from a close friend who's a money manager to many of the big money athletes, is that players are instructed by their "people" to maximize their first free agent/big money contract...not by looking at the headline number, but by aftertax dollars. They have it drilled into their heads that they are professional athletes whose careers can end tommorow, so they need to bank it now. After the big contract, sure, play where you want, but set yourself up first. When two offers are similar, choose the best tax structure, not the team. Many take this advice to heart and you would be surprised at what lengths some of these guys go to preserve their bank accounts. Players making 8 figure yearly salaries have themselves put on monthly allowance. Bills get paid through accounting offices to keep tabs on their indulgences. As far as Lebron, the state tax issue was #2 on his list of considerations. Look where all the golfers and tennis players live. All the northern European golfers take residence in Florida. The window for maximum earnings is small, so keep as much as you can.