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Economy / Taxes

LeBron James Votes With His Feet (And Perhaps Uses Show-Me Institute’s IDEAS Application?)

By Christine Harbin on Jul 12, 2010

This is admittedly old news, but in my defense, I do not follow sports. From the Wall Street Journal:

According to an analysis by Richard Vedder, an economist at Ohio University, [LeBron] James’s net present value tax savings on his salary are between $6 million and $8 million by living in Miami versus his home town of Akron.

This demonstrates how taxes can incite people and businesses to change their behavior. When tax rates differ across geographies, individuals and businesses have an incentive to move to the area of lower burden. This is largely why states that do not tax income experience larger rates of growth than states that do.

Later in the article:

While LeBron’s departure got extraordinary media attention, it is hardly unique. In the early 1990s, Ohio was the home of 43 Fortune 500 companies. Twenty years later the number is 24. Census Bureau data show that from 2004-2008 Ohio saw a net outmigration of $6 billion of income and some 97,000 taxpayers. Even Ohio’s famously liberal Senator, the late Howard Metzenbaum, moved to Florida late in his life to reduce his estate taxes.

If Missouri were to reduce or eliminate its income tax, then it would encourage more individuals and businesses (and professional athletes!) to locate here.

I have no means to verify or disprove this, but perhaps James used the Show-Me Institute’s IDEAS application in his decision process. Individuals can use the site to compare competitive tax environments across states, and I encourage our blog readers to play with the site to see how they would fare if they relocated.

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Christine Harbin

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