Location, tax rates can have big impact on contract’s value

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With the mind-boggling money being doled out in NBA contracts, players don’t seem to be overly concerned about state taxes – or the lack of them.

Stephen Curry signed a $201 million deal with Golden State and Blake Griffin got a $175 million from the Los Angeles Clippers. The rub: In California, the top tax rate of 13.3 percent is the highest in the nation. To get just a rough indication of how much state tax they might face, consider that 13.3 percent of $201 million is about $26.7 million.

Meanwhile, Houston Rockets guard James Harden signed a $228 million extension to play in Texas, which has no state income tax.

Players are keenly aware of the differences, but it’s just one of many factors in their decisions.

How big a factor, it depends on the player and situation.

“It’s a consideration” for players, said Sean Packard, the tax director for Octagon Financial Services. “It’s not always the be-all and end-all, but it’s definitely something agents look at and that players look at.”

But when it comes to the IRS, the dollars connected to a player’s contract don’t tell the whole story about how much he’s going to be making. Where a player chooses to play – for instance the Boston Celtics or the Miami Heat – could go a long way in determining how much money he ends up receiving.

Players realize they could make more accepting a deal for less money from a team located where there are no state taxes than by signing with a team offering more money but located where there are state taxes.

“You’ve got to remember the best gross contract might not be the best net contract,” said Robert Raiola, who includes many professional athletes among his clients in his role as director of sports and entertainment for the PKF O’Connor Davies accounting firm.

Raiola cites former Utah Jazz forward Gordon Hayward‘s recent deal with the Celtics as an example. Boston and the Miami Heat could have offered Hayward essentially the same contract, but Hayward would have made more in Miami due to the different tax rates in Florida and Massachusetts. Of course, that would depend on where he had taken up residence.

Hayward agreed to a four-year deal with a total value of around $128 million. But according to Raiola’s calculations, Hayward’s “net” deal adds up to about $69.4 million after taxes are taken into consideration. Raiola said the same contract from Miami would have netted Hayward about $71.4 million.

If Hayward had stayed in Utah, he could have received a five-year maximum deal worth over $172 million. Raiola said that would have equated to about $91.3 million after taxes.

These types of comparisons aren’t uncommon.

Packard says he has a client who was choosing among three teams last year. Packard said a team from a state without an income tax offered his client the lowest salary, but it actually turned out to be the most lucrative deal once taxes were taken into account.

Packard says teams located in places without state income taxes use it as a leveraging tool and make players well aware of the advantages of signing there. In the NBA, that would include the Heat, Rockets, Orlando Magic, San Antonio Spurs, Dallas Mavericks and Memphis Grizzlies.

“When they’re pitching a player, they’ll say (that) we may be offering you less money, but they’ll kind of do their own calculations for the taxes and show that this is how you end up netting,” Packard said. “They know what other teams are pitching as well.”

Massachusetts has a 5.1 percent tax rate, whereas Florida doesn’t have a state income tax. But figuring out the difference in what Hayward would have made in Miami rather than Boston isn’t as simple as comparing those figures.

That’s because many states have a so-called “jock tax” that charges athletes visiting from other states to play games. For instance, Texas doesn’t have a state income tax, but members of the Mavericks, Rockets and Spurs are taxed for each day they spend practicing or playing road games in states that do have this tax.

Under that same rule, even if Hayward chooses to live somewhere other than Massachusetts, he’d be taxed by the state for each day he spends in Boston playing in a game, practicing or participating in some other team function.

So the difference in net pay an athlete might receive for choosing a team in a low-tax state over a team in a high-tax state isn’t as great as it might be if he were only being taxed in his home state.

These types of decisions must be made by free agents in all sports – not just basketball.

When defensive tackle Ndamukong Suh left the Detroit Lions for the Miami Dolphins in March 2015, he received $60 million in guaranteed money. Raiola said the difference in tax rates meant the Lions would have needed to offer him $65 million guaranteed just for the two contracts to have the same net value.

But tax rates are just one factor in a player’s decision.

“It’s all up to the player’s preference,” said Josh Horowitz, a co-founder of the sports and entertainment division at the WithumSmith+Brown accounting firm. “Maybe a player wants to live in New York and wants to live that lifestyle, so they’re willing to pay the extra tax, as compared to going to Miami or Texas.

“It depends on what they want to do. If they want to go chase a ring, they’ll go to Golden State right now and pay the higher tax to chase a ring. It all depends on what everyone’s preference is.”

 

Kings GM Vlade Divac: ‘My team is a super team. Just young’

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The Kings drafted Marvin Bagley No. 2 last night (seemingly for bad reasons, which doesn’t at all eliminate him from being the right pick but makes it less likely he is). He’ll join a young core also comprised of Bogdan Bogdanovic, De'Aaron Fox, Buddy Hield, Willie Cauley-Stein, Skal Labissiere, Justin Jackson and Harry Giles.

That group excite you?

Kings general manager Vlade Divac isn’t reducing expectations.

Lina Washington of ABC 10:

To be fair, in 2012, the Warriors were coming off a 23-43 season with Stephen Curry and Klay Thompson already on the roster and had just drafted Draymond Green and Harrison Barnes. Everyone would’ve laughed at calling Golden State a “super team, just young” then. But those four (plus Andre Iguodala) eventually led the Warriors to a championship.

But, really: Nah.

Entering the 2016-17 season, then-Knicks guard Derrick Rose said, “They’re saying us and Golden State are the super teams.” We mocked Rose relentlessly, and of course, the Warriors went 73-9 while New York finished just 32-50.

How long until Divac’s young super team reaches even 32-50?

Spurs GM still optimistic relationship with Kawhi Leonard can be salvaged

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SAN ANTONIO (AP) — General manager R.C. Buford acknowledges star forward Kawhi Leonard is unhappy with the Spurs.

He remains optimistic the relationship can be salvaged.

Leonard has requested a trade from San Antonio because he is unhappy after missing most of last season with a right quadriceps injury. Buford would not comment on “speculation” of a trade demand, but agreed there is a fractured relationship between Leonard and the only franchise he has played for.

“Kawhi and his family mean a lot to the organization and to the community and while none of wish we are where we are, we’re going to do what we can to build the best relationship we can with him,” Buford said Thursday night as the Spurs made two late picks in the NBA Draft. “We’ll explore all of our options, but the first one would be to do what we can to keep Kawhi as part of our group.”

Leonard missed the first 27 games of the season but returned to play in nine games. He complained of discomfort and pain in the leg in his final game. Leonard sought an outside opinion after the Spurs cleared him to play, working with his own medical team in New York in an attempt to return to the court. The 6-foot-7 forward reportedly grew upset that the Spurs had questioned his rehabilitation process.

The Spurs listed him as out on their injury reports for much of the year citing “injury management.” While San Antonio was in the playoffs, losing in the first round to eventual repeat champion Golden State, Leonard was rehabbing in New York – which meant that Spurs coach Gregg Popovich, when asked for the situation, deferred all comment to “Kawhi and his group.”

“I think all of us would wish that things would have gone differently,” Buford said.

The Spurs held a team meeting late in the season where veterans, led by Tony Parker, implored Leonard to return. Leonard said he was unable to due to the injury.

In the 2016-17 season, Leonard averaged a career-best 25.5 points and was third in the MVP voting. The 2014 NBA Finals MVP and two-time NBA defensive player of the year is due just over $20 million next season, and can become a free agent in the summer of 2019. He is eligible to sign a $220 million extension with San Antonio.

He is reportedly willing to walk away from that to play elsewhere, possibly in Los Angeles.

“I don’t know that timing is a factor in this from today … he’s under contract for another year, our goal is to keep him as part of our program for a long time,” Buford said.

 

NBA Draft Winners, Losers: Big nights for Phoenix, Dallas

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Let’s start with the obvious — this whole story is a fool’s errand. It really takes about three years to accurately assess who are the winners and losers in the NBA draft. Guys we thought were locks will turn out to be pretty pedestrian, guys we wrote off as projects down the board will impress. In three years, we’ll have a real sense of which teams read this draft well and nailed it.

But we don’t live in that world.

So here are my projections on the real winners and losers Thursday night in Brooklyn, starting with the guys who didn’t screw up the No. 1 pick.

 

Suns small icon Winner: Phoenix Suns.

It isn’t just that they didn’t screw up the top pick and landed in DeAndre Ayton, the guy most likely to be a franchise cornerstone star in this class. Although they did that. Also, it was their move later to trade their pick at No. 16 (Texas Tech’s Zhaire Smith) for Mikal Bridges — most likely the best “3&D” prospect in this draft (it cost them a future first via Miami). By the time everyone was trying to get an Uber outside Barclays Center the Suns had put together a starting lineup of Devin Booker, Bridges, Josh Jackson, and Ayton (plus a point guard to be named later). That’s a group worth watching — and they hired Igor Kokoskov as their new coach this summer because he’s strong on player development. It’s the start of something.

Phoenix also drafted French point guard Elie Okobo at 31 in the second round when a lot of teams thought of him as a first-round talent. Another smart move.

Loser: Michael Porter Jr.

A couple of weeks ago, Porter was mentioned as a potential No. 2 selection to the Kings. But after teams got a look at his medical reports from last Friday’s workout — remember, he missed all but three games at Missouri following back surgery — they backed off. Reports about his attitude didn’t help. Porter slid all the way down to Denver at 14. What that means to him besides getting to play at altitude in Denver: The No. 2 pick is slotted for a $7.3 million salary next season, the No. 14 makes less than $3 million. We’ll see if Porter can use this as motivation — and stay healthy.

One winner in this: The Denver Nuggets for grabbing him at 14. That is a good team (they just missed the playoffs) with strong players already where Porter can be brought along slowly without unreasonable expectations.

Mavericks small icon Winner: Dallas Mavericks.

Mark Cuban and company traded up from No. 5 to No. 3 and landed Luka Doncic — the player they had highest rated on the board. This is a win for the Mavs and for Doncic because he lands with a brilliant Xs and Os coach in Rick Carlisle who will put him in positions to succeed, plus Doncic gets mentored by Dirk Nowitzki. This pick also is a strong move because he should pair well with young point guard Dennis Smith Jr. — Doncic can run the pick-and-roll at times with Smith cutting and moving off the ball, and in the reverse Doncic has a good catch-and-shoot game. Dallas has options for playmaking now.

Also, nice second-round pickup of Villanova point guard Jalen Brunson. That’s a high IQ player who can step in as a reserve and help immediately.

Loser: Robert Williams.

The Texas A&M big man has the talent of a late lottery pick — the Clippers met with him a couple of times — but concerns about his attitude and work ethic saw him plummet all the way down the board to 27. Will he use this as motivation to play with a high motor all the time, or will he continue to coast? If he brings it, he could be the steal of this draft. That brings us to…

Celtics small iconWinner: Boston Celtics (because they got Robert Williams).

This was an Oceans 9 level robbery (that’s the next movie, right?) for Danny Ainge this late in the first round. At No. 27 you’re usually just hoping to get a guy who can develop into a role player in a few years. Williams is much more than that, he has the tools to be an elite NBA defender, and in college he was a defensive and rebounding force. In the NBA he’s going to be a rim running big, ala DeAndre Jordan — except Jordan fulfilled his potential. It’s up to Boston to get that out of Williams (and it’s up to Williams himself to work), but if they do this was another brilliant Ainge pick.

Loser: Golden State Warriors.

They tried to buy into the second round as they did a year ago and pick up someone who fits their style — and this year they had $5.1 million to do it (more than the $3.5 million a year ago). However, other GMs remember how much heat the Bulls front office took for selling their pick to Golden State last year and watching the Warriors draft Jordan Bell — Mr. “cash considerations” was playing a role in the NBA Finals. No GM wanted to repeat that mistake. No early second-round pick for the Warriors this year.

However, their first-round pick of Jacob Evans was a good one, he’s the kind of versatile wing player who fits into their rotation.

Winner: Puma.

The German soccer cleat maker shoe and apparel company wanted to get back into the basketball game, and the did it with a splash — their guys Ayton and Bagley went No. 1 and 2. That’s going to be a lot of free publicity and a lot of eyes on their players starting in Summer League and beyond. The company also landed guys with real potential in Michael Porter Jr. and Zhaire Smith.

Oh, and they hired Jay-Z as well. That’s a good week whatever else happens.

Winner: NBA Twitter

The guys in suits up the executive food chain tried to put an end to Woj bombs this year — ESPN was trying to clamp down on their news breakers Tweeting out the picks before they happened (as had been the case for a few years, with Twitter often two or three picks ahead of Adam Silver and the broadcast). Other major news breakers (such as Yahoo’s Shams Charania) agreed to play along. We all thought we would have to wait around for Adam Silver to saunter up to the table.

But if there is one thing NBA Twitter has taught us it’s that it will not be contained. It breaks free, it expands to new territories and crashes through barriers, painfully, maybe even dangerously. NBA Twitter, uh… finds a way.

Before long Twitter picks were leaking and Twitter was a pick ahead of the broadcast again, and Adrian Wojnarowski was dropping bombs, cleverly not saying who the pick was but….

NBA Twitter is the best.

Lonnie Walker’s Spurs hat appears as if it’s floating above his head (photo)

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Basketball players don’t wear hats.

White Men Can't Jump (1992)

OK, scratch that. NBA players don’t wear hats.

But it has become tradition for draft picks to don a cap of the team that selected him.

So, even though Lonnie Walker‘s hair looks like this (via AP):

Pittsburgh Miami Basketball

…he put on a Spurs hat when they selected him No. 18:

NBA Draft Basketball

Even Elfrid Payton did a much better job cramming his do into his hat on draft night:

Walker, an athletic shooting guard who underperformed at Miami, was a surprising choice by San Antonio. The Spurs generally prioritize basketball intelligence over athleticism (though, to be fair, that’s hardly an absolute).

But no matter how Walker fits in San Antonio goes, it probably won’t be more awkward than this.