Kuminga’s Timberwolves Deal Saves Millions in Taxes Despite Lower Pay Than Lakers Offer
Kuminga’s Timberwolves Deal Saves Millions in Taxes Despite Lower Pay Than Lakers Offer
Jonathan Kuminga has agreed to a two-year, $12.4 million contract with the Minnesota Timberwolves, a move that significantly reduces his tax liability compared to a larger offer from the Los Angeles Lakers. While the deal results in lower after-tax earnings than the Lakers' proposal, it reflects a strategic choice to avoid California's high income tax rates.
Jonathan Kuminga agreed to a two-year, $12.4 million contract with the Minnesota Timberwolves on Wednesday, a financial decision that highlights the impact of state tax rates on professional athlete compensation. The move comes shortly after reports indicated that the Los Angeles Lakers had offered a sign-and-trade deal exceeding three years and at least $12 million per year.
Kuminga’s choice to join Minnesota has drawn attention due to the substantial difference in gross salary compared to the Lakers' proposal. However, the decision also offers significant tax advantages. According to data from California’s Franchise Tax Board, Kuminga would have paid approximately $6.4 million annually in taxes on a $12 million contract while living in Los Angeles. In contrast, figures from the Tax Foundation suggest he will pay roughly $3 million per year in taxes on his Timberwolves salary.
This disparity means Kuminga saves about $3.4 million annually in taxes by relocating to Minnesota. Despite these savings, the move results in a lower net income. Even with California’s high tax burden, Kuminga would have retained approximately $5.6 million per year after taxes from the Lakers deal, compared to $3.2 million from his new Timberwolves contract.
By accepting the Minnesota offer, Kuminga effectively leaves about $2.4 million in after-tax income on the table each year. This financial trade-off suggests that monetary gain was not the primary driver behind his decision to join the Timberwolves. The choice may also be influenced by a desire to avoid California taxes, a burden Kuminga has experienced during his five seasons with the Golden State Warriors.
The long-term implications of this financial decision will depend on team performance. If Kuminga fails to win a championship in Minnesota, he may face regret over the lost earnings from the Los Angeles offer. Conversely, if he succeeds in Minnesota, the tax savings and potential for future contracts could justify the initial financial sacrifice.
S.Ross--TNT
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