Kawhi Leonard is set to sign a maximum contract in the coming days. Here is why he will not end up back with the Raptors.
Since NBA free agency began this weekend, I have seen a lot of wishful Tweets and articles from Canadians on why Kawhi Leonard will resign in Toronto. I hate to be the bearer of bad news, but there is no way on earth Leonard is re-upping with the Raptors. It just doesn’t make any sense. Let’s break it down.
Next, Canadian financial advisors are claiming they can save him millions with proper planning on his contract. This is possible, but Canada Revenue Agency would have to play along. The NBA allows 15% of a player’s salary to be allocated to a signing bonus. Under the US-Canada tax treaty, payments from the Canadian teams to US athletes “as an inducement to sign an agreement relating to the performance of the services of an athlete” are to be taxed at 15%.
Finally, Raptors fans say, correctly, that the Raptors can offer Leonard more money and more years than any other team. This argument is correct but is easily broken down. First, Leonard is 28. In four years he will be 32 and will sign another max contract. He is getting that fifth year somewhere with someone and will get paid maximum money to do so. If he has a career-ending injury during this contract period, he will be paid through a disability policy that he most-assuredly has bought.
The first four years of a Raptors max contract would average $36,624,000 annually. The max average any other team can offer is $35,152,500. As a Canadian non-resident, Leonard is only responsible for Canadian taxes on days he is in Canada working for the Raptors. Then there is the pesky issue of state taxes. California does not allow a credit for taxes paid to foreign countries or provinces, so Leonard would be on the hook for California taxes on 100% of his income. Those taxes on his Raptors income would amount to $4,871,000. All told, his net annual income with the Raptors would be $14,618,000, or $58,472,000 total over the first four years of the contract.
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