Are the Memphis Grizzlies Undercut by Tennessee's Athlete Tax?

Tom Firme@TFirmeAnalyst IIAugust 5, 2013

MEMPHIS, TN - MAY 27:  Zach Randolph #50 and Mike Conley #11 of the Memphis Grizzlies react after losing to the San Antonio Spurs 93-86 during Game Four of the Western Conference Finals of the 2013 NBA Playoffs at the FedExForum on May 27, 2013 in Memphis, Tennessee. NOTE TO USER: User expressly acknowledges and agrees that, by downloading and or using this photograph, User is consenting to the terms and conditions of the Getty Images License Agreement.  (Photo by Kevin C. Cox/Getty Images)
Kevin C. Cox/Getty Images

Memphis Grizzlies players might not like the Tennessee athlete tax, but it isn't what weakens the Grizzlies' ability to form a championship team. 

First, NBA players aren't afraid of high-tax states. Second, Memphis' continuing payroll limitations keep them from stockpiling elite players. Third, the Grizz have never attracted big-name free agents.

The Athlete Tax—Like Any Tax—Has Little Impact on NBA Teams

In a legislative committee hearing on July 25, representatives of Grizz players argued for the repeal of the professional-privilege tax, according to The Commercial Appeal (subscription required).

The tax, which was passed in 2009 to help pay for the publicly funded FedEx Forum, charges each NBA and NHL player $2,500 per game play at the Grizzlies' or Nashville Predators' homestead. Players can be taxed up to $7,500.

Since it only applies to NBA and NHL players, it doesn't apply to players visiting the Tennessee Titans or the Volunteer State's minor league sports teams.

In this sense, the arguments that the tax is unfair make a bit of sense. Only players in two sports pay the tax, although NFLers on only 13 teams would pay if it applied to football. 

Also, NBAers might wish to be reimbursed like NHL players are for the tax. But that's a grievance to air within the association, not to lawmakers.

However, the tax is relatively fair in its application to NBA players. Every team plays in Memphis at least once. Some Western Conference teams descend on Beale Street twice. 

Even Jamaal Franklin, a minimum-salary rookie, will pay less than 1.5 percent of his salary for the tax. All other Grizz players will give up less than one percent for it.

Moreover, an editorial in The Commercial Appeal editorial (subscription required) incorrectly laments that the athlete tax hurts the Grizzlies' chances at big-name free agents. That athletes will eschew high taxes or progressive tax policies, like an athlete tax or a millionaire tax, is a popular conservative talking point, but it's moot in regards to team sports.

In the NBA, a player's primary concern is playing on a title-winning team. This often means playing in and possibly residing in states with high taxes or progressive tax policies.

Such taxes don't stop players from going to teams in such states. New York has an above-average property-tax rate and a millionaire tax and taxes nonresidents who work in the state. This didn't stop Kevin Garnett from waiving his no-trade clause to join the Brooklyn Nets. Also, players don't seem to be leaving the Nets or New York Knicks because of taxes.

Dwight Howard orchestrated a trade to the Los Angeles Lakers last summer, going to a state with a higher income tax than Florida. His signing with the Houston Rockets didn't appear to be motivated by a desire to play in Texas, which has no income tax.

The Miami Heat's Big Three came together to win titles, not simply to live in a state lacking an income tax.

Thus, other factors loom larger in determining why big names don't flock to Memphis.

The Grizzlies Have Never Pulled Banner Acquisitions

Most of the players in Grizzlies franchise history were obtained either through draft picks or trades. As I noted in a ranking of the best Grizzlies signings ever, the team has never signed anyone who was more than a role player from another team. They have also never signed away a guy for an eight-figure deal.

The major acquisitions for this small-market team have been Zach Randolph and Tony Allen. Allen is a role player who came off the bench for the Boston Celtics before the Grizz grabbed him. Randolph was a high-risk, high-reward trade acquisition who posted back-to-back disappointing seasons before coming to Memphis.

Indeed, the Grizz are relatively young in NBA years and not as accomplished as other franchises. In 18 seasons, they've made the playoffs six times and have yet to win a game beyond the first two rounds. Memphis has the third-worst franchise winning percentage, at .383.

Additionally, the Grizz couldn't use highly reputed head coaches to attract stars. Hubie Brown and Mike Fratello stayed in Memphis for less than two full seasons. Both led scrappy, fringe playoff teams starring Pau Gasol and several role players.

After Mike Miller's return to the Grizzlies was announced, The Commercial Appeal's Geoff Calkins declared that the Grizzlies would become a destination for stars (subscription required). But an aging role player who was just amnestied is anything but a bellwether.

Calkins' claim isn't stimulating Mo Williams, who has been a moderate possibility for the Grizzlies, as ESPN's Marc Stein tweeted:

While Calkins quoted Miller as saying yjay the Grizzlies had become a team for which many wanted to play, he'd have to name them. Ray Allen expressed dismay when he learned last March he was about to go to Memphis in a purported deal that didn't go through before the deadline, per Yahoo! Sports.

Players aren't signing for less or orchestrating trades to don the three shades of blue. This isn't because of any tax situation, but a lack of winning tradition and a tight payroll situation.

Standing Close to the Luxury-Tax Threshold Doesn't Help

The Grizz haven't had much flexibility in acquiring big-time players because they've hung close to the luxury-tax threshold the past couple years. Big deals for Marc Gasol, Zach Randolph and Rudy Gay tied their hands.

In the past two seasons, they've maneuvered around the threshold by trading Sam Young in 2012 and Marreese Speights this January. The Gay trade gave them a little extra wiggle room. 

Still, much of what they had available this free agency after Jerryd Bayless exercised his option was sucked up when Tony Allen re-upped.

Memphis will have a little more flexibility next year. If Randolph exercises his 2014-15 option, they Grizzlies will have $56.9 million committed to seven players. Depending on this season's results, some of the available money may guarantee Kosta Koufos' 2014-15 contract and lock up Ed Davis for a few years.

A small-market team with a front office that isn't eager to spend past the threshold and without connections that ease sizzling acquisitions doesn't attract many significant free agents.

Conclusion: Several Factors Influence Player Movement More Than Taxes

In the minds of NBA players, taxes don't rank highly when players decide on teams. The man may consider a team's title chances; the players that would surround him; and the city's amenities, market size and location in relation to his family before taxes.

Even though Tennessee is the only state with this tax, it won't scare anyone away or force current Grizz players to flee. 

What will attract players to the Grizzlies are a deep playoff run and a demonstration by Dave Joerger that he can help the team better itself.


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