Tuesday, December 15, 2020

Giannis will keep getting his Freak on in MKE

I was planning to go into economic/policy stuff today, but around 12:30, something big happened in Wisconsin. 5 years, $228 million to stay in Wisconsin, between the ages of 27 and 31. Wow.

It's a game-changing move for the Bucks to keep 2-time league MVP Giannis Antetokounmpo, and not just for the NBA (many teams based their plans and salaries in the hope the Bucks could not sign Giannis, making him become a free agent in Summer 2021). It also feels like a big boost for the Bucks franchise and the City of Milwaukee, as both were frequently shrugged off by Coastal media as "small-market", which media said would somehow lessen the team's chances of keeping Antetokounpo because it allegedly wasn't as glamorous to play in the Cream City as other places.

But this ignored some realities. The first being that the Greek Freak didn't go through the AAU-and-college circuit that the typical American superstar basketball player does. Milwaukee is the city that hosted Giannis when he came to America as a 19-year-old draft pick, so I don't think the thought of "greener pastures in NYC/LA/Chicago/Miami" is as relevant to him.

Maybe this is being naive, but Giannis legitimately seems to be the kind of guy who just wants to play ball and WIN. And be able to be around his family without a lot of hassle. In a way, I think Milwaukee's smaller-city status worked in its favor here. There aren't TMZ-style tabloid photogrpahers around every street corner, and a major athlete can get around town without having mobs of people running up to him. Obviously, a 7-foot Black man isn't going to able to be anonymous walking down the street, but it's never seemed like superstars such as Ryan Braun, Christian Yelich, or Aaron Rodgers have had to deal with the type of craziness that kept Michael Jordan in his hotel room in most cities in the 1990s (if you watched "The Last Dance", you know what I'm referring to).

And it's not like Giannis is lacking for major endorsement dollars playing in Milwaukee, given the national/international way that NBA stars are marketed. He earned a reported $28 million in endorsements in 2019, and Nike has given Giannis his own campaign and shoe line.

In 2019, Antetokounmpo made more from endorsements than he did under his Bucks contract. That's not going to be the case in the future, as Giannis is going to get a significant pay increase under the league's Designated Veteran Player Extension (DVPE, aka a "supermax contract"). Under this rule, Milwaukee had an edge on other teams because Giannis could make the most money by staying with the Bucks, and he is one of only a handful of players to qualify for the supermax, as this greater explainer from The Athletic describes.
The DVPE enables the NBA’s best players to earn the league’s largest possible contract values earlier than usual. After 10 seasons, NBA players can earn 35 percent of their team’s salary cap with 8 percent yearly raises. Opposing teams can offer just 30 percent of their team’s salary cap with 5 percent raises. The DVPE allows teams to give their best player the 35 percent max with 8 percent raises after just eight seasons instead of 10 seasons, if the player has done each of the following things:

• Been named to an All-NBA team or defensive player of the year in either the most recent season or two of the three most recent seasons or won NBA MVP in any one of the prior three seasons.
• Completed seven or eight seasons when the extension is executed.
• Spent those years of service on the team he signed his first contract with or joined the current/offering team during the first four years he was under contract.

While teams can offer a variety of other extensions to their own players, the DVPE has a special set of rules that will become particularly important for this offseason. Antetokounmpo can only sign the DVPE between the start of the next fiscal season and the day before the start of the regular season, a detail wrote into the CBA to avoid the league’s best players getting subjected to constant badgering to sign the extension during the season.
And that deadline was what made the topic of "will Giannis sign an extension?" such a big topic this month, as the NBA season starts one week from tonight. Now that question is answered.

I also caught ESPN's Adrian Wojnarowski talking about how Giannis passed up the chance to have a higher rate of take-home pay if he had signed with teams in states like Texas and Florida that don't have a state income tax. But go back to those Supermax rules, and then project the "35% of salary cap and 8% raises" numbers, and look at what Antetokounmpo is going to make. Now compare that to "30% of $112.4 M salary cap and 5% raises, and it looks like this.

2021-22 $33.7 mil (-$5.6 mil vs MKE)
2022-23 $35.4 mil (-$7.1 mil)
2023-24 $37.2 mil (-$8.5 mil)
2024-25 $39.1 mil (-$9.7 mil)
2025-26 $41.0 mil (-$10.9 mil)

Wisconsin's top marginal income tax rate is 7.65%, and in reality, the actual % tax as a rate of income will likely be closer to 6% for the highest earners in Wisconsin. If you assume a 6% tax bill in year 1, that's $2.36 million, well below the $5.6 million in extra income that Giannis was able to get for staying in Milwaukee. Even take out 37% extra federal taxes on that amount, and that's still $3.5 million extra being taken home in year 1, with that gap growing higher in future years. So the argument of "lower taxes in other places" as an incentive doesn't fly in this situation.

But at a certain point, how much more money do you need? Which goes back to my earlier discussion about Giannis - what place would allow him the best chance to play ball, be with his family, and WIN? When you look at it that way, and combine it with the financial incentives, and it makes sense that Giannis chose to stay in Milwaukee.

I opposed the local and state subsidies that went into building the FiServ Forum for the Bucks a few years ago, and I'd still argue that there are many better uses for tax dollars in the state's largest city than pumping it into that development (especially in a year of over 200 homicides in Milwaukee).

But at the same time, it's unlikely that Antetokounmpo stays in Milwaukee if the enhanced money-making abilities of the FiServ aren't there. And it's going to be pretty damn cool to be seeing a lot of this in my state over the next 6 years.
So now that the Freak is locked up, it's time to get an NBA title back in Milwaukee for the first time in 50 years. With actual playoff games in Milwaukee this year as well!

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