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Miami Was The Easy Choice For LeBron James – Econ 101

Published by Papa Giorgio

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Jilted Basketball Fans Should Blame the Income Tax, not LeBron James

by Dan Mitchell

Supporters of the Cleveland Cavaliers, especially the owner of the team, are upset that basketball superstar LeBron James has decided to sign with the Miami Heat. The anger is especially intense because the Cavaliers offered $4 million more over the next five years. But their anger is misplaced, because more money in Cleveland, Ohio, actually translates into about $1 million less disposable income when the burden of state and local income taxes is added to the equation. Rather than condemn James for making a rational choice, local basketball fans should tar and feather Ohio politicians.

This story from CNBC walks through the calculations.

…if you match up what James’ salary would be for the first five years in Cleveland and the five years in Miami, you find that the Cavaliers are only offering him $4 million more. That advantage gets erased — and actually gives the Heat the monetary edge over — when you consider the income tax difference. …Playing in Cleveland, LeBron would face a state income tax of 5.925 percent, plus a Cleveland city tax of two percent. Over the first five years of a new contract with Cleveland, James would give back $3,953,060 combined to the state and city for the 41 games each season he’d play at home. But James would have to pay none of that for home games in Miami since Florida doesn’t have an income tax. Athletes have to pay income taxes to states that they play in on the road, so the games he’ll play away from home — whether he played for Cleveland or Miami — are essentially a wash. But there are, on average, 11 away games per season where James would have to pay Ohio and Cleveland taxes. Why? Because he has to pay when he plays in the six areas – Florida, Texas, Washington D.C., Illinois, Toronto and Tennessee – that have no jock taxes. That’s another $1,061,128 he’ll have to pay in taxes that he wouldn’t have to pay in Miami.

New York basketball fans also should be angry. With some of the highest taxes in the nation, many of which target highly productive people as part of class-warfare policy, New York is bad news for professional athletes.

The New York Post, commenting on the probability that James would sign with the Miami Heat, identified the real villains.

…blame our dysfunctional lawmakers in Albany, who have saddled top-earning New Yorkers with the highest state and city income taxes in the nation, soon to be 12.85 percent on top of the IRS bite. There is no state income tax in Florida. On a five-year contract worth $96 million — what he’d get from the Knicks or the Heat — LeBron would pay $12.34 million in New York taxes. Quite a penalty for the privilege of working in Midtown.

Now let’s look at the big picture. The calculations that LeBron James made when deciding to sign with the Miami Heat are the same calculations that companies make when deciding whether to build factories and create jobs…

…(read more)…

ReasonTV Critiques Hillary Clinton’s View on Taxes and Fairness

Published by Papa Giorgio

Secretary of State Hillary Clinton recently said that “the rich are not paying their fair share” of taxes in the United States and other developed countries.

Is she right? It depends on what you consider fair. Using 2006 data, The New York Times found that the richest 20 percent of households were paying 26 percent of their income to the federal government in the form of income, payroll, corporate, and excise taxes. The average for all familes? 21 percent.

And there’s this: “In 2006, the top quintile of households earned 55.7 percent of pretax income and paid 69.3 percent of federal taxes, while the top 1 percent of households earned 18.8 percent of income and paid 28.3 percent of taxes.”

Paying in a lot more than you get out? That doesn’t seem fair.

The rich are different than you and me; they’ve got more money. And they pay more taxes.

Politicians are different too–they rarely say what they really mean. Perhaps what Secretary Clinton means is that the rich can always pay more than they’re already paying.

That would explain why she and the president are lobbying to let the Bush tax cuts expire at the end of the year, a policy that would raise all sorts of taxes on all sorts of people.

Which doesn’t sound all that fair either.

See more at REASON!

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