Billionaire LeBron James Collects Nearly $6,533,886 From NBA’s Withheld Fund
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Just like the rest of the world, the NBA too had to make some adjustments in order to deal with the coronavirus (COVID-19) pandemic. In one such vein, the league decided to increase its escrow tax from the initially agreed-upon 10% to 25% to address the declines in arena revenue. In the subsequent season, a “ten-and-spread” system was introduced to supplement the standard 10% withholding, to be gradually reduced over three years.
Despite these measures, there was still a carryover of approximately $130 million heading into the 2022-23 season. The entire escrow fund for the 2022-23 season would have been reimbursed to the players if not for this lingering deficit. As a result, the NBA withheld 15% of player salaries last season to ensure that the revenue split was achieved.
As per Sportico, the league’s financial audit of the 2022-23 season shows that business has bounced back strongly from its COVID-19 shortfalls. This positive turn of events signifies the return of nearly the entire escrow fund, amounting to almost $700 million, to the players. To break it down further, LeBron James, initially slated to earn $44,474,988 in the 2022-23 season, had $6,671,248 of his salary withheld during that season. With the league’s financial rebound, players are now poised to recoup 97.35% of their salary that was previously withheld, translating to $6,533,886 in LeBron James’ case.
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Understanding the NBA escrow tax
For those who are unfamiliar with what an escrow tax is, let’s make it simpler. According to the Collective Bargaining Agreement (CBA), each active player is entitled to receive 51% of Basketball Related Income (BRI) as part of their contracted salary. To ensure a fair distribution, the league implemented an escrow tax as a safeguard. Traditionally, the league withheld 8–10% of player compensation, serving as a buffer. If player salaries fell short of the agreed-upon amounts, this withheld percentage was returned to the players. Conversely, if player salaries exceeded their designated share of BRI, the surplus funds from the escrow account would be returned to the team owners.
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However, due to the pandemic, the league made a minor adjustment to the escrow tax percentage, raising it to 25% to shield players from revenue losses caused by game cancellations and fan restrictions due to COVID precautions. However, given that the league was able to hatch a plan and successfully complete the season, the NBA was able to pay back around $400 million to the players from the escrow account. As reported by ESPN’s Adrian Wojnarowski, this was around $13 million per team and was divided out based on the 10% of salary each player had paid in.
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Ruth John
