James Harden could face massive tax bill after trade

The Houston Rockets have traded eight-time All-Star James Harden to the Brooklyn Nets as part of a four-team deal involving the Indiana Pacers and Cleveland Cavaliers. The Rockets obtained multiple first-round picks, opportunities to swap draft picks and several players, including Victor Oladipo, Dante Exum and Rodions Kurucs.

Harden, 31, had demanded a trade because of frustration with the Rockets, who are 3-6 and seemingly in rebuilding mode.

While the former MVP will join superstar Kevin Durant and, potentially, Kyrie Irving, who is currently out for personal reasons, the move will cost Harden money. The Rockets had offered him a two-year, $103 million extension that would have followed the $133 million he is already owed over the next three seasons. The Nets will be unable to offer such an extension due to salary-cap restrictions.

Harden also leaves Texas, one of nine states without an income tax on wages, for New York, one of the nation’s highest taxing states. While Harden will continue to be owed the same amount of money over the next three years, his pay will be subject to an approximately 12.7% tax rate between New York State and New York City.

In November, we ran the numbers on a Harden trade to the Nets. The short of it: He’ll pay an additional $13.6 million in taxes over the next three years. The following chart, which incorporates jock taxes and assumes that Harden will be a resident of New York City, breaks down the numbers:

Beyond taxes, Harden will experience a far higher cost of living in New York than in Houston. According to Nerd Wallet, it is 92% more expensive to live in Brooklyn, and 165% more expensive to live in Manhattan, than in Houston. Potentially offsetting the increased taxes and cost of living may be lucrative endorsement opportunities in the nation’s largest media market.

Harden might not care much about these tradeoffs. He has already earned well over $225 million in his NBA career from salaries and endorsements, among them Adidas, Electronic Arts and BodyArmor. He now has the chance to win a championship.

For the future Hall of Famer, an NBA title might be priceless.

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