Quote:
Originally Posted by Casey2296
Not only that, if you can avoid paying the government 20-80 cents on the dollar and give it to the player instead you’ve just cut your offer by that same percentage.
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And that tax factor can possibly work to the player's benefit as well. You get $10M in one year, you get so much taxed at 10%, then so much taxed at 12%, and so on per the federal tax brackets in place up to where the balance of that $10M salary all gets taxed at the current top federal tax rate of 37%. Break that into ten years of $1M of salary though, and now you have 10 times the amount of salary being taxed at 10% instead of 37%, 10 times the amount taxed at 12% versus 37%, and so on. Unfortunately some of that savings is offset by the additional social security tax the player will also have to pay each of 10 years, but I believe the player still comes out ahead federal tax-wise by extending their salary through deferral.