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Sunday, May 5, 2013
L.A./Dallas dollars difference not nearly as much as it appears

By Tim MacMahon

The Mavericks will have to overcome a money mountain to convince Chris Paul or Dwight Howard to come to Dallas.

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The collective bargaining agreement gives their current teams a tremendous financial edge this summer, allowing them to offer five-year deals with annual raises that are 7.5 percent of the first year’s salary, as opposed to the four-year deals with 4.5 percent raises the Mavs and others can offer.

In Howard’s case, it’s a difference of $30.4 million. In Paul’s case, the difference is $28.2 million.

Dig a little deeper in the numbers, however, and the Mavs (and Houston Rockets, for that matter) can make a case that the offers would be a lot closer than they appear.

California millionaires pay a 12.3 percent state income tax after last year's tax hike. The great state of Texas doesn’t levy a state income tax on its citizens.

But that 12.3 percent is deceiving, because NBA players pay state income taxes for each road game. So cut it in half. And there is all kinds of complicated legal speak in the laws, so we'll stick with estimates.

That means Howard would pay about $7.5 million more in taxes if he spends the next five seasons playing for the Lakers instead of the Mavs (or Rockets). Paul would pay about $6.5 million more in taxes if he sticks with the Clippers instead of joining one of the Texas teams.

Essentially, the lack of a state income tax in Texas more than makes up for the three-percent-higher annual raises the Lakers and Clippers can offer their superstars.

However, it doesn’t address the extra year in the contract. It’d take a major leap of faith for Paul or Howard to feel like that isn’t a huge difference.

In other words, they’d have to be confident that they’d get another max deal after this one expires, when Paul will be 32 and Howard 31. That could be especially hard for Howard, considering that he had back surgery last year, but let’s assume for the sake of discussion that Mark Cuban convinces them the Mavs’ max commitment will extend after this contract.

The first-year value of their next deal in Dallas would be $22.24 million for Paul and $24.44 million for Howard.

Five-year value in Dallas for Paul: $102 million. In L.A.: $107.3 million.

Five-year value in Dallas for Howard: $112 million. In L.A.: $118 million.

Subtract the extra tax they’d pay in California and they’d actually make a few bucks more playing for the Mavs (or Rockets) than if they stayed in L.A.