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  • LeBron's Taxing Decision

    What would it take to lure basketball star LeBron James away from his hometown Cleveland Cavaliers to sign a contract with the Miami Heat? Believe it or not, taxes might have something to do with it, and that’s an important message for all levels of government.

    In Florida, James’ new place of business, there is no income tax, and the superstar will see a big benefit in his bottom line for playing ball in a Heat jersey. James will make $1.014 million more in Miami than in Cleveland over the first five years of his contract, all as a result of differences in tax rates. (He would have paid $12.34 million in taxes over five years if he played with the Nets or the Knicks.)

    But the economic impact of James’ decision does not begin and end with LeBron James. The Miami Herald reports that the Heat’s big score will net beaucoup bucks for the team:

    It’s tantamount to signing the Beatles to a season-long engagement at our stadium,” said Scott Becher, president of Boca Raton-based Sports and Sponsorships.

    You’re probably looking at $10 million or more in playoff revenue alone, not to mention maybe another $10 million on regular-season ticket sales, sponsorship and media sales.

    That, in turn, means increased tax revenue for the City of Miami, the county and the state. Conversely, that also means an estimated $8.25 million loss of revenue in 2011 alone for the Cleveland Cavaliers, which in turn is a loss of revenue to the City of Cleveland and the State of Ohio, not to mention any associated businesses the would have benefited from James’ star power. The Knicks, too, could have reaped the benefits of signing James; one estimate pegged his value in ticket sales and advertising at $35 million by 2011-2012.

    The LeBron James story, though, has a bigger picture message for government. Talent is valuable to the economy, and high taxes can have an impact on where talented people choose to live and work.

    For example, James isn’t the first person to take a pass on living large in New York City. According to a 2009 study, New York state lost 1.5 million residents from 2000 to 2008, amounting to an 8 percent drop in population. Of those who left, 1.1 million were residents of New York City. Why the mass exodus? Taxes are a big factor.

    The LeBron James lesson is one that states and local governments ought to learn — high taxes can drive out talent, leading to a loss in business (and tax revenue). But the federal government should take heed, too. At the end of this year, the 2001 and 2003 tax cuts will expire, leading to the largest tax hike the middle class has ever seen. Pro athletes aren’t the only people who don’t like paying high taxes; highly-skilled doctors, engineers and scientists considering a career in the United States just might take a look at the U.S. tax burden and choose to do business elsewhere.

    Posted in Ongoing Priorities [slideshow_deploy]

    11 Responses to LeBron's Taxing Decision

    1. polly lambdin says:

      DUH!!!!!!!!!!!!!!!!!!!!!!!!!!!! Do ya think???????? Anyone in their right mind would do that,I guess he doesn't want to redistribute HIS MONEY!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

    2. Paul, Atlanta says:

      Well written Mike!

    3. keli, coral gables says:

      Excellent Article!!

    4. Billie says:

      I heard LaBron James is an awesome individual who donates much of what he earns to needy charities. God Bless you, Mr. James and way to go!

    5. Kevin, Oregon says:

      Of course you are right, but the Feds & states will not take the hint, so the rest of us poor slobs will fund the ever increasing bill.

    6. Jonathan, Cairo says:

      Hmmm…I doubt income taxes had much of a factor in his final decision.

      This article completely ignores the fact that Mr. Jame will be receiving a MUCH smaller figure in Miami than he would've in NYC. 30 millions less over five years, according to some reports. That's a figure that differences in income taxes can't make up for.

      With this in mind, it's clear that his decision was not primarily motivated by money. Instead, he went to Miami to join Dwayne Wade and Chris Bosh in an effort to win an NBA championship, taking a pay-cut in the process.

    7. E. Raiford, Tulsa, O says:

      Why can't other states follow the example Miami has set? How obvious the influence taxes has on the economy. An excellent article.

    8. dbwelch says:

      i believe that jonathan has it right (unfortunately). james decision may look and smell like a monatery move, but i am pretty sure he knew that in the long run there were more bucks in ny. he wants two things. the limelight as the greatest and the lifestyle of southern florida as apposed to the drab, gray uneventful monotony of the midwest. i don't blame him. i have lived in both and there is no comparison.

    9. Filmstar CTF says:

      E. Raiford,

      Last time I took a geography class Miami wasn't a state. Who knows maybe things have changed.

      Yes, Florida does not have an income tax but their property and sales taxes are much higher then in Ohio. Florida has a very regressive tax system which is why the state is the crap hole it is. Unlike other states that have a more progressive tax system.

    10. Robert says:

      I laugh at people who say," Money was not really a part of his decision." If it was not then he would have asked for the max deal and taken it from Cleveland. His decision was an economic decision in the truest definition of "economics". Money was on variable, to be considered, but he was seeking more. If money was not an issue, he could have played with the Lakers for the league minimum. If money was a true issue, then he could have signed with the New York, New Jersey or Cleveland for a max deal.

      Miami was the only team that could optimized all aspects of the decision:Money, Strong Organization, and chance to win a championship. Its obvious based on the decision that the last two factors is why he left Cleveland and did not choose the other destinations. Its simple, if you understand economics!

    11. Pingback: mukoma.com

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