The real reason LeBron went to Miami: Big government and tax-happy politicians

In what turned out to be a circus of an announcement, Lebron James chose Miami over numerous other NBA teams, including his former team in Cleveland. By league rules, Cleveland had the ability to offer James more money than anyone. If Lebron James had stayed in Cleveland however, he would have actually made less – even though he was getting paid more – than he would in Miami due to state and city income taxes hed have to pay in Cleveland. CNBC has the breakdown:

…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.

Sure, James would be guaranteed one more year if he signed with Cleveland, but unless the business of basketball supremely changes, you have to believe James will be worth as much at the end of the 2014-15 season as he is now.

So if you match up the five years in Cleveland to five years in Miami, and include Florida’s tax advantage, LeBron would actually make $1,014,188 over five years with the Heat than he would with the Cavaliers.

This should come as no surprise though. We’ve been seeing a mass exodus of wealthy individuals in states that have treated the successful as never ending troughs of tax revenue. New York and New Jersey tax policies for instance, have lead to a big shift in wealth to states with no income tax – like Florida and Texas. According to one recent study, New Jersey alone lost nearly $70 billion in net wealth from 2004 to 2008 because fewer rich people moved in than out and one of the main reasons identified for that has been the state’s obscene taxes on the wealthy.

Regardless, just add the disappointment of Cleveland and New York Knick fans in not landing LeBron James to the long list of unintended consequences of big government and liberal policy.

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