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When the prospects taken in Thursday’s NBA Draft sign their first contracts, many of which are multi-year, multi-million-dollar deals, it doesn’t mean they’re just set for life.
There are several unexpected costs to signing seven- and eight-figure deals that people may not realize, according to Adonal Foyle, a 1997 first-round pick who played 12 years in the NBA.
While speaking to Business Insider to promote his new book “The Athlete CEO,” Foyle broke down some of the lesser-known costs of being an NBA player, including the actual participation in games.
“I think the biggest thing is that the idea of the jock tax.” Foyle said. “Most Americans are not familiar with that. And paying taxes in every state that you play in.
“If you’re not in that kind of business or in the entertainment field, you don’t understand what that means and the multitude and mountains of tax work and legal documents that goes into playing in the league in terms of, you play in 30 places, you pay 30 different taxes.”
According to Robert Raiola of Sports Illustrated, 21 of the 25 states that have professional sports teams (prior to the introduction of the Las Vegas Golden Knights and future Las Vegas Raiders) institute the jock tax, which affects players, coaches, trainers – anyone that travels with the team.
“Once you leave a state, you leave 1/82 of your salary,” said Foyle, based on the 82-game schedule of NBA teams. “I mean, that’s how it’s divided up. So, I think that knowing the state, local, federal and everything that goes into taxes, and then you put on top of it this jock tax … it’s a bit unfamiliar to most people.”
Foyle made $63 million during his career, according to Basketball-Reference, but with things like taxes and other costs, it really doesn’t add up to $63 million.
“You have taxes, you have socialists, your psychological issues, you have an agent that can get anywhere between 1-4%, and then you have financial people and how you can choose to invest. Again, they can take anywhere from half-a-percent to a percentage to manage your portfolio. You have marketing people that take their percentages.
“You really have to pay attention to the multitude of people that is part of your payroll and that you’re responsible for at the end of the day and making sure that you have some money left at the end.”
As former NBA player Josh Childress once explained, an $11 million contract really becomes $5 million after taxes. Then, after players spend on themselves for purchases like a house and a car, they often will buy family or friends something nice. Suddenly, that money has been spent quicker than expected.
According to Foyle, it’s important for players to manage their own money, know where it’s going, and to ask questions. Foyle said players should “audit” everyone, including their mothers.
“If you audit your mama, then there’s no one that will pass scrutiny because you’ll audit everybody else.”
Foyle said he hopes to educate and empower future generations of athletes to prevent people from going broke. Learning how quickly even eight-figure contracts can be spent is a good place for athletes to start.