Lamar Odom: The New Poster Child for Tax Reform?

Joe Mathews
Connecting California Columnist and Editor, Zócalo Public Square, Fellow at the Center for Social Cohesion at Arizona State University and co-author of California Crackup: How Reform Broke the Golden State and How We Can Fix It (UC Press, 2010)

Is California’s tax system about to cost the Los Angeles Lakers a star player?

There’s long been a dispute about why high-income people leave California. Some say that high taxation and regulation drive businesses and rich people out of the state. Others pour cold water on such claims, and note that poor people leave California at a much faster rate than do the rich. The controversy isn’t settled in part because there’s little objective data on why people leave California. The state doesn’t conduct a census of ex-Californians.

So we’re left to the world of anecdote, which brings us to Lamar Odom.

For those who don’t follow the Lakers, Odom is an extraordinarily versatile player, capable of playing any position on the floor and invaluable to the champion Lakers (despite frustrating bouts of inconsistency). He had been expected to re-sign with the Lakers, but he and his agent were reportedly slow to respond to a contract offer from the team owner Jerry Buss, who responded by pulling the offer.

In the meantime, the Miami Heat has launched an aggressive bid to steal him away.

What do California taxes have to do with this? By all accounts, the Lakers have offered more money than the Heat. But in California, Odom pays the highest rate of 10.55 percent. Florida has no state income tax. According to published reports, the Heat have been emphasizing in negotiation that the California taxes negate much of the financial advantage of the Lakers’ offer.

Here are the numbers. Odom reportedly received two offers from the Lakers. One, at $10 million a season for 3 seasons, would incur a state income tax of more than $3 million over the life of the contract. Another, at $9 million a season for 4 seasons, would force Odom to pay state income taxes of more than $3.6 million.

The Heat offer is less financially generous annually—a reported $34 million over 5 seasons. But its total value is higher because of the number of years – and because Florida has no state income tax. When considered on an annual basis, the California taxes cut the difference in value of each offer almost in half (though each of the Lakers’ offers is more generous on an annual basis).

Does any of this matter? The argument for yes is: the California taxes on high-income earners hurt taxpayers in two ways.

1. We could lose the taxes Odom was currently paying as a member of the Lakers.

2. We could lose him as an effective player, who helped take the Lakers to the championship (and thus generated more economic activity).

The argument for no is: Odom’s departure is more about a disagreement with the Lakers’ owner than anything else. And the Lakers are replacing him with a strong player, Ron Artest, who will also produce taxes (though not as many, because Odom’s salary was higher).

If the star forward leaves for Miami, Californians should prepare to hear his name invoked over and over again as California wrestles with whether to change its tax system.

Without Odom, Laker fans will be angry – not only at their team but also at Sacramento.

Comment on this article

Please note, statements and opinions expressed on the Fox&Hounds Blog are solely those of their respective authors and may not represent the views of Fox&Hounds Daily or its employees thereof. Fox&Hounds Daily is not responsible for the accuracy of any of the information supplied by the site's bloggers.