The Indiana Pacers-Sacramento Kings trade involving Domantas Sabonis and Tyrese Haliburton was a win-win deal for both parties. By acquiring Sabonis, the Kings ended their playoff drought last season. On the other hand, the Pacers discovered a superstar in Haliburton. The 6’5 guard instantly became the go-to guy for the Indiana side and would conclude his first season as a Pacer with 20.7 points and 10.4 assists. The front office rewarded him by offering a five-year, $207 million rookie contract extension following a successful 2022-2023 season. Haliburton also has a chance to increase the amount to $260 million with the various incentives being offered. At first glance, $260 million does seem like a lot of money. However, the 23-year-old will be reportedly losing over 50% of his salary every year due to taxes.
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The Jock Tax is of the many taxes that Haliburton will have to bear the cost of. What is this tax you may ask? Following the Chicago Bulls’ 1991 Championship win against the Los Angeles Lakers, the state of California released income tax assessments of all the players on the Bulls roster. Believed to be a revenge for the Lakers’ Finals loss, the “Michael Jordan” tax would subsequently be enforced on players playing in different states. Take a look at Joe Pompliano’s tweet for more details:
1) The “Jock Tax” became famous in 1991.
Michael Jordan and the Chicago Bulls had just beaten the LA Lakers in the NBA Finals.
But after the championship parade, MJ’s accountant received a notice from California saying MJ owed $10,000 in taxes for the games he played in LA.
— Joe Pompliano (@JoePompliano) April 17, 2023
As revealed by Andrew Petcash recently, Tyrese Haliburton will be losing out on $690,000 due to the jock tax.
How Tyrese Haliburton will lose more than 50% of his salary per year
Halliburton’s five-year, $207 million deal will result in him getting paid $41.4 million per year on average. As surprising as it may seem, the All-Star will be losing out on $23.7 million after paying all kinds of taxes.
Apart from the jock tax, the youngster will have to pay Federal taxes, FICA/medicare fee, State tax, and sundry other fees. After paying all the required taxes and fees, the combo guard will merely be left with $17.7 million. Take a look at the details in Andrew Petcash’s tweet.
Tyrese Haliburton just signed a 5-year $207M contract extension w/ the Pacers.
Here’s how much he will actually earn: 😲
$41.4M: Salary
–
$15.3M: Federal Tax
$4.1M: NBA Escrow
$1.2M: Agent Fee
$971k: FICA/Medicare
$690k: Jock Tax
$652k: Indiana Tax
=
$17.7M: Net Income pic.twitter.com/TT7gbHbc9P— Andrew Petcash (@AndrewPetcash) July 2, 2023
The highest-paid player in franchise history could eventually witness his contract increasing to $260 million, subject to different contingencies. Even though these incentives aren’t disclosed yet, it’ll be safe to assume that the extra $53 million will be awarded on the basis of All-Star & All-NBA selections, playoff success, and other individual accolades.
A costly start to the 2023 free agency
The 2023 free agency hasn’t disappointed so far. On day 1 itself, it took merely an hour for over $1 billion to be spent on signings.
Joining Tyrese Haliburton were LaMelo Ball and Desmond Bane, who also signed max contract extensions with their respective teams. Domantas Sabonis, who reportedly took a pay cut to allow the Kings to build a roster around him and De’Aaron Fox, signed a five-year, $217 million extension.
Other stars who signed lucrative deals were – Kyrie Irving (five-year, $126 million), Jerami Grant (five-year, $160 million), Kristaps Porzingis (two-year, $60 million), and Fred VanVleet (three-year, $130 million), among several other big names. Clearly, this summer’s free agency hasn’t disappointed at all.
