Why Is a Player paying more taxes than an Owner?
I typically stick to discussing issues in sports on this blog, and don’t deviate into issues of finance or politics, simply because I find them depressing, to be honest. However, I was shocked today to find out a serious financial issue that involves some big NBA names: LeBron James and Steve Ballmer.
Now, both men are neighbors whose teams share the same arena (LeBron plays for the Lakers while Ballmer owns the Clippers), but I was surprised to find out about the amount of taxes each man pays and how it doesn’t break down the way you’d expect it to.
According to Yahoo Sports, LeBron James paid three times more in taxes in 2018 than Steve Ballmer did. Let’s examine that quickly. One of the NBA’s premier players, who makes millions of dollars a year, specifically $124 million that year, was subject to a 35.9% federal tax rate. Meanwhile, Ballmer, the billionaire owner of the Clippers and one of the richest people in the world, reported an income of $656 million but was only subject to a 12% federal tax rate.
Now, this was apparently “legal” because U.S. tax code states that when you buy a sports franchise, you can write that purchase off as a business expense, which explains why Ballmer paid so little in taxes relative to James.
However, that doesn’t mean it’s right. I understand that the two examples here are people who are far from “the struggle.” One is very wealthy, and the other is ultra-wealthy, but I hope that this helps bring the discussion about taxing billionaires more into the minds of sports fans.