Shaquille O’Neal thought he hit the jackpot in 1996. The Big Diesel signed a seven-year, $120 million deal with the Lakers, one of the league’s fattest contracts.
But reality hit absolutely differently. His first paycheck in Hollywood came with a brutal wake-up call. California’s tax hammer crushed his expectations faster than he crushed rims.
Shaquille O’Neal on How $20 Million Became Just $7-8 Million
O’Neal broke down the numbers in a recent FOX26 Houston interview with Jade Flury. The Hall of Famer didn’t hold back on the ground reality about athlete salaries and America’s hectic tax system.
“So, my first year with the Lakers, I made $20 million,” Shaq told Flury. “And I thought I was netting $20 million, but when I got the check, it was 10.9.”
California taxes ate half his money right off the bat. The Golden State charges a top income tax rate of 13.3 percent. That’s among the highest in the nation.
But the bleeding didn’t stop there. O’Neal explained how the so-called entertainment tax hit him for another $4 million. Athletes pay this levy in every city where they perform. It’s commonly known as the jock tax.
“So I probably only netted about seven or eight million out of the twenty,” Shaq said.
The jock tax forces players to file returns in every state they visit. An NBA player hits around 15 different tax jurisdictions per season. Each state takes its cut based on duty days worked there.
O’Neal referenced Odell Beckham Jr.’s recent comments about burning through cash. The NFL star said spending $100 million comes easy. Shaq agreed completely.
“If you understand business, EBITDA, and all those business terms, a hundred million isn’t a hundred million net,” O’Neal explained. “You have to pay taxes.”
The Big Aristotle stressed three critical words for young athletes: listen, annuities, and save. He learned this lesson the expensive way.
“A lot of people don’t know that as athletes, we have to pay an entertainment tax in every city we perform in,” Shaq said. Players support families, buy jewelry and cars. The money disappears faster than crossovers.
O’Neal emphasized teaching yourself about business fundamentals. Understanding investing and saving becomes essential. Otherwise, that bag shrinks quickly.
The modern jock tax exploded after the 1991 NBA Finals. California taxed Michael Jordan and the Bulls after they won the chip in LA. Illinois clapped back with “Michael Jordan’s Revenge” legislation.
Now 21 states and eight municipalities enforce jock taxes. Only Florida, Texas, Tennessee, Nevada, and Washington don’t collect them. That’s why stars love playing in Miami, Houston, and Dallas.
Shaq owns homes in Sugar Land, Pearland, and The Woodlands — all in tax-free Texas. The 53-year-old learned his lesson decades ago. He built a business empire worth over $400 million post-retirement.
But that first Lakers check stung. Losing $13 million to taxes taught him everything he needed to know about financial literacy.
