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Archive for the ‘Migration’ Category

I’ve been in Panama with some friends for the past two weeks, in part to enjoy warm sunshine.

But I’m also here because I wanted to research possible options in case the United States somehow wound up with a hard-core leftist in the White House.

With “Crazy Bernie” fading and “Looney Liz” out of the race, that no longer appears to be an immediate threat.

That being said, America’s grim long-run fiscal outlook, combined with the other factors such as young people’s senseless support of socialism, suggests that it may just be a matter of time before the U.S. morphs into a stagnant, European-style welfare state.

(And don’t forget that Joe Biden is actually farther to the left than Barack Obama and Hillary Clinton.)

So let’s investigate whether Panama is a good option, not just for Americans, but also for people from other nations as well.

The place to start is the Fraser Institute’s Economic Freedom of the World. Based on their comprehensive rankings of economic liberty, Panama gets a 7.66 on a 0-10 scale, which places it at #31 out of 162 nations.

That puts the country comfortably in the top quartile of “most free” jurisdictions. Moreover, it is the second-freest nation in Latin America, trailing only Chile (#13).

Here’s how Panama does when looking at specific components of economic policy.

  • The good news is that the country gets a solid score for fiscal policy (#19) and excellent scores for monetary policy (#8) and trade (#5).
  • The not-so-good news is that Panama has a middling score for rule of law and property rights (#80) and a weak score for regulation (#95).

These scores are only a snapshot for the most-current year, so it’s also worth noting that Panama has been very stable.

For the past couple of decades, its score has ranged between a low of 7.27 and a high of 7.88. Going back further in time, it’s even been ranked in the top 10 a couple of times.

In other words, Panama has not been susceptible to wild policy swings. Or Venezuelan-style foolishness.

To be sure, the politicians in Panama are prone to populist measures, but bad policies are adopted for vote-buying reasons (i.e., public choice) rather than ideology. Indeed, there is not a successful left-wing party in the country.

Because Panama gets good-but-not-great scores for economic liberty, you won’t be surprised to learn that the people of Panama enjoy decent-but-not-great living standards.

According to World Bank calculations, Panama qualifies as a “high income” nation, but that category is very broad (basically $14,000 and up). For perspective, per-capita income in Panama is only about one-fourth of U.S. levels.

And, notwithstanding convergence theory, that gap probably won’t shrink much in the near future since the United States currently has significantly more economic liberty (ranked #6 compared to #31).

But this column is for people who fear that America’s score may tumble in the future because of a frightening development (perhaps a President AOC?).

Here’s a few final thoughts to consider.

  • Panama’s currency (from the country’s inception) is the dollar.
  • There is a large community of expats already in Panama, including thousands of Americans.
  • The government has done a good job of managing the Panama Canal.
  • The nation is making slow but steady progress on problem areas such as infrastructure.
  • Crime and personal security are not major concerns.
  • The tax burden is very reasonable, particularly for people with non-Panamanian income.

The bottom line is that Panama is a good place for foreigners. The government has a welcoming attitude so long as immigrants are self-sufficient. And you don’t need to be rich to live a nice life in Panama.

P.S. In the past, I’ve suggested that Australia is the best long-run option if the United States suffers a Greek-style economic decline. That’s still true, especially since the Aussies have a mostly private Social Security system. Switzerland is always a good option, along with the Cayman Islands, especially for people with more assets (everyone should keep in mind that those jurisdictions may not be ideal if the the U.S. and most of Europe are in decline and American readers should remember the IRS’s odious exit tax).

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I pointed out yesterday that Donald Trump has increased domestic spending at a faster rate than Barack Obama, Bill Clinton, or Jimmy Carter.

The day before, I castigated him for proposing a budget that expands the burden of government spending by $2 trillion over the next decade.

And two days before that, I explained that he hasn’t really changed the trend line on jobs.

So it’s safe to say I don’t go out of my way to say nice things.

But I’m also very fair. I don’t hesitate to praise politicians whenever they do good things, or to point out evidence that their policies are having a desirable effect.

And here’s a tweet that suggest Trump has made a positive difference.

This is an amazing shift.

Especially since Trump hasn’t actually fixed the problems that lead some successful people to expatriate.

But he has moved policy in the right direction is some of those areas thanks to the 2017 tax legislation.

His other achievement, which is probably even more important, is that he’s not Hillary Clinton. In other words, we’re not getting the bad tax policies that might have occurred in a Clinton Administration.

So it’s understandable that there’s been a big drop in the number of expatriates. The type of people who might move (the “canaries in the coal mine“) now think things are getting better rather than worse.

By the way, we’re talking about small numbers of people. But they’re often exactly the type of people – entrepreneurs, inventors, and innovators – that help drive growth.

P.S. I’ll add today’s column to my collection of noteworthy tweets.

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People underestimate the importance of modest long-run trends.

  • A small boost in economic growth, if sustained, can have a major effect on long-run living standards.
  • A small shift in the growth of government spending, over time, can determine a nation’s fiscal viability.
  • A small change in birthrates, in the long run, has a huge impact on a country’s population and finances.

Another example is state-level migration.

This is occurring for many reasons, including demographics and weather.

But it’s also happening because many people are moving so they can benefit from the better opportunities that exist in lower-tax states.

The Tax Foundation has an article on interstate migration based on data from United van Lines.

States compete with each other in a variety of ways, including attracting (and retaining) residents. Sustained periods of inbound migration lead to greater economic output and growth. Prolonged periods of net outbound migration, however, can strain state coffers… While it is difficult to measure the extent to which tax considerations factor into individuals’ moving decisions, there is no doubt that taxes are important in many individuals’ personal financial deliberations. Our State Business Tax Climate Index uses over 100 variables to evaluate states on the competitiveness of their tax rates and structures. Four of the 10 worst-performing states on this year’s Index are also among the 10 states with the most outbound migration in this year’s National Movers Study (New Jersey,  New York, Connecticut, and California).

Here’s the map showing states ranked my migration status.

Similar data also is collected by U-Haul.

Mark Perry of the American Enterprise Institute put together this visual on the states with the most in-migration and out-migration.

He looked at the data based on voting patterns. I’m more interested in the fact that states without income taxes do very well.

By the way, we don’t have to rely on moving companies.

And here are some excerpts from an editorial by the Wall Street Journal on the topic, based on data from the IRS and Census Bureau.

Slowing population growth will have significant economic and social implications for the country, but especially for high-tax states. The Census Bureau and IRS last week also released state population growth and income migration data for 2018 that show the exodus from high-tax to low-tax states is accelerating. …New York was the biggest loser as a net 180,000 people left for better climes. Over the last decade New York has lost more of its population to other states (7.2%) than any other save Alaska (8%), followed by Illinois (6.8%), Connecticut (5.6%) and New Jersey (5.5%). Hmmm, what do these states have in common? Large tax burdens… Where are high-tax state exiles going? Zero income tax Florida drew $16.5 billion in adjusted gross income last year. Many have also fled to Arizona ($3.5 billion), Texas ($3.5 billion), North Carolina ($3 billion), Nevada ($2.3 billion), Colorado ($2.1 billion), Washington ($1.7 billion) and Idaho ($1.1 billion). Texas, Nevada and Washington don’t have income taxes.

Here’s an accompanying visual.

Once again, we see a pattern.

Tax policy obviously isn’t the only factor that drives migration between states, but it’s clear that lower-tax states tend to attract more migration, while higher-tax states tend to drive people away.

And keep in mind that when people move, their taxable income moves with them.

Which brings me back to my opening analysis about trends. Over time, the uncompetitive states are digging themselves into a hole. Migration (at least by people – the Golden Geese – who earn money and pay taxes) in any given year may not make a big difference, but the cumulative impact will wind up being very important.

P.S. Speaking of which, feel free to cast your vote for the state most likely to suffer fiscal collapse.

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When non-libertarian audiences ask my opinion about immigration, I generally point out that it is a very good sign that so many people want to come to the United States.

Almost everyone agrees with that statement, but that doesn’t put them in the pro-immigration camp. Instead, I find that many people have a “what’s in it for us” attitude.

  1. They like the underlying concept of programs such as the EB-5 visa that attract immigrants with money, and they are broadly sympathetic to immigrants with skills and education. At the risk of over-simplifying, they want immigrants who won’t rely on handouts and they like immigrants who presumably will increase the nation’s per-capita GDP (and there certainly is strong evidence that this happens).
  2. They’re skeptical of mass immigration by people with low incomes. This is mostly because they fear such migrants will impose higher costs on taxpayers, though Republican types also seem motivated by concerns about future voting patterns. The notable exception to this pattern is that business audiences are somewhat sympathetic to mass migration because they believe labor costs will fall.

When I deal with people in category #2, I sometimes ask them about Tyler Cowen’s idea of allowing limitless migration from nations with bigger welfare states. After all, I doubt people such as “Lazy Robert” will move from Denmark to the United States.

But what about poor people from poor nations? Would they like to migrate to rich nations to get handouts, rather than for economic opportunity?

Taxpayers in many nations are worried about that possibility and are not very welcoming to immigrants who will collect benefits.

Indeed, that’s motivated the Trump Administration to consider tightening rules for who gets in the country.

The Trump administration announced long-awaited “public charge” immigration regulations this week, and the furor immediately kicked up to derangement level. …But immigration regulation of this sort has been a part of our laws for more than a century…the 1882 act declared that “any convict, lunatic, idiot, or any person unable to take care of himself or herself without becoming a public charge…shall not be permitted to land.” …The 1952 revisions to immigration law maintained the idea that the government may exclude “paupers, professional beggars, or vagrants” and those who are “are likely at any time to become public charges.” …In 1996, Congress strengthened the public charge provisions…why would anyone call the Trump administration’s interpretation “un-American?” …the regulations—which do not apply to refugees, asylum-seekers, and various other groups—propose guidance to determine if an immigrant would be likely to use the welfare system for more than 12 months during a three-year period.

But it’s not just a controversy in the United States.

Taxpayers in the Netherlands, for instance, are becoming less tolerant of immigrants who want handouts rather than work.

Non-Western immigrants and their descendants also depend on welfare to a much greater extent than the native Dutch. They are half of all welfare recipients but only 11% of the total population. Among recent Somali refugees granted asylum, 80% are on welfare. Holland is truly a welfare state, and the Dutch are proud of it. …This type of open and yet highly regulated society can function only if it is carried by a disciplined and well-educated citizenry… That is what the fuss is about. To put it in abstract terms: Can a welfare state become an immigration state? You know the answer: A welfare state with open borders will one day run out of money.

I can’t imagine that stories like this make German taxpayers happy.

As early as 2016, German newspapers have been reporting on migrants with recognized refugee status having holidays in countries that they “fled,” such as Afghanistan, Lebanon, and Syria. Because Hartz IV, the welfare system that certain migrants granted refugee status receive, permits 21 days per year of “local absence,” those who have recognized refugee status and have no income or assets simply leave Germany for vacation and continue to receive money from German taxpayers.

There are also concerns that welfare spending hinders economic integration and independence in Sweden.

…only 20 percent of the Somali immigrants in Sweden have jobs, according to a report released on Monday by the government’s Commission… In an opinion article published in the Expressen newspaper, the author of the report, Benny Carlsson of Lund University, explained that Sweden would be well served to let community-based organizations do more…rather than relying on public agencies… Carlsson explained that…Sweden’s rigid labour market and labour protection laws also create “higher risks” for employees which amount to “higher thresholds” for Somali jobseekers. …Carlsson also cited Sweden’s social safety net which “lets people live at a decent level even if they don’t work, while the same can’t be said of the United States”.

Speaking of Sweden, stories of welfare dependency help to explain this report in the New York Times.

…four years after the influx, growing numbers of native-born Swedes have come to see the refugees as a drain on public finances. …Antipathy for immigrants now threatens to erode support for Sweden’s social welfare state. “People don’t want to pay taxes to support people who don’t work,” says Urban Pettersson, 62, a member of the local council here in Filipstad, a town set in lake country west of Stockholm. “Ninety percent of the refugees don’t contribute to society. These people are going to have a lifelong dependence on social welfare. This is a huge problem.” …Under the Nordic model, governments typically furnish health care, education and pensions to everyone. The state delivers subsidized housing and child care. When people lose jobs, they gain unemployment benefits… But the endurance of the Nordic model has long depended on two crucial elements — the public’s willingness to pay some of the highest taxes on earth, and the understanding that everyone is supposed to work. …Sweden’s sharp influx of immigrants — the largest of any European nation, as a share of the overall population — directly tests this proposition. …The unemployment rate was only 3.8 percent among the Swedish-born populace last year, but 15 percent among foreign-born… Roughly half of all jobless people in Sweden were foreign-born. …these sorts of numbers are cited as evidence that refugees have flocked here to enjoy lives of state-financed sloth. …The average refugee in Sweden receives about 74,000 Swedish kronor (about $7,800) more in government services than they pay into the system, Joakim Ruist, an economist at the University of Gothenburg, concluded in a report released last year and commissioned by the Ministry of Finance. Over all, the cost of social programs for refugees runs about 1 percent of Sweden’s annual national economic output

But is it true that migrants are looking for handouts? Are the afore-cited stories just random anecdotes, or do they suggest some countries are “welfare magnets”?

I’ve already shared some evidence that welfare recipients inside the United States gravitate to places that provide bigger benefits.

And this seems to be the case for migrants that cross national borders. Here are some findings from some new academic research showing that the generosity of Denmark’s welfare state has a significant impact on migration choices.

We study the effects of welfare generosity on international migration using a series of large changes in welfare benefits for immigrants in Denmark. The first change, implemented in 2002,lowered benefits for immigrants from outside the EU by about 50%, with no changes for natives or immigrants from inside the EU. The policy was later repealed and re-introduced. The differential treatment of immigrants from inside and outside the EU, and of different types of non-EU immigrants, allows for a quasi-experimental research design. We find sizeable effects:the benefit reduction reduced the net flow of immigrants by about 5,000 people per year, or 3.7percent of the stock of treated immigrants, and the subsequent repeal of the policy reversed the effect almost exactly. Our study provides some of the first causal evidence on the widely debated “welfare magnet” hypothesis. …our evidence implies that, conditional on moving, the generosity of the welfare system is important for destination choices.

Here’s the relevant graph from the study, based on two different ways of slicing the data.

As you can see from the red lines, migration fell when benefits were reduced, then immediately jumped when benefits were increased, and then immediately fell again when they were again lowered.

For what it’s worth, scholars believe that support for the welfare state in Europe is declining for these reasons. Taxpayers are tolerant of subsidizing their long-time neighbors, but are much less sympathetic when giving away money to newcomers.

From my perspective, the solution is obvious. I generally like immigration and generally don’t like redistribution.

So why not reduce benefits, ideally for everyone, but just to migrants if that’s the only possible outcome. That way nations are more likely to attract people (especially from low-income societies) who are seeking economic opportunity.

P.S. If you want to enjoy some immigration-related humor, we have a video about Americans migrating to Peru and a story about American leftists escaping to Canada.

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California is suffering a slow but steady decline.

Bad economic policy has made the Golden State less attractive for entrepreneurs, investors, and business owners.

Punitive tax laws deserve much of the blame, particularly the 2012 decision to impose a top tax rate of 13.3 percent.

I’ve already shared some anecdotal evidence that this tax increase backfired.

But now we have some scholarly evidence from two Stanford Professors. Here’s what they investigated.

In this paper we study the question of the elasticity of the tax base with respect to taxation using microdata from the California Franchise Tax Board on the universe of California taxpayers around the implementation of Proposition 30 in 2012. This ballot initiative increased marginal income tax rates… These increases came on top of the 9.3% rate that applied to income over $48,942 for singles and $97,884 for married couples, and also in addition to the 1% mental health tax that since 2004 had applied to incomes of over $1 million. The reform therefore brought the top marginal tax rate in California to 13.3% for incomes of over $1 million.

For those not familiar with economic jargon, “elasticity” is simply a term to describe how sensitive taxpayers are when there are changes in tax policy.

A high measure of elasticity means a large “deadweight loss” since taxpayers are choosing to earn and/or report less income.

And that’s what the two scholars discovered.

Some high-income taxpayers responded to the big tax increase by moving.

We first study the extensive margin response to taxation, and document a substantial one-time outflow of high-earning taxpayers from California in response to Proposition 30. Defining a departure as a taxpayer who went from resident to non-resident filing status, the rate of departures in 2013 over 2012 spiked from 1.5% after the 2011 tax year to 2.125% for those primary taxpayers earning over $5 million in 2012, with a similar effect among taxpayers earning $2-5 million in 2012.

By the way, you won’t be surprised to learn that California taxpayers increasingly opted to move to states with no income tax, such as Florida, Nevada, and Texas.

Other taxpayers stayed in California but they chose to earn and/or report less income.

We combine these results on the extensive margin behavioral response with conclusions of analysis of the intensive margin response to Proposition 30. …we use a differences-in-differences design in which we compare upper-income California resident taxpayers to a matched sample of non-resident California filers, for which there is relatively rich data… Our estimates show a substantial intensive margin response to Proposition 30, which appears in 2012 and persists… We find that California top-earners on average report $522,000 less in taxable income than their counterfactuals in 2012, $357,000 less in 2013, and $599,000 less in 2014; this is relative to a baseline mean income of $4.15 million amongst our defined group of California top-earners in 2011. …the estimates imply an elasticity of taxable income with respect to the marginal net of tax rate of 2.5-3.3.

In the world of public finance, that’s a very high measure of elasticity.

Wonky readers may be interested in these charts showing changes in income.

By the way, guess what happens when taxpayers move, or when they decide to earn less income?

The obvious answer is that politicians don’t collect as much revenue. Which is exactly what the study discovered.

A back of the envelope calculation based on our econometric estimates finds that the intensive and extensive margin responses to taxation combined to undo 45.2% of the revenue gains from taxation that otherwise would have accrued to California in the absence of behavioral responses. The intensive margin accounts for the majority of this effect, but the extensive margin comprises a non-trivial 9.5% of this total response.

We can call this the revenge of the Laffer Curve.

By the way, it’s quite likely that there has been a resurgence of both the “extensive” and “intensive” responses to California’s punitive tax regime because the 2017 tax reform restricted the deductibility of state and local taxes. This means that the federal government – for all intents and purposes – is no longer subsidizing California’s backwards fiscal system.

P.S. Makes me wonder if California politicians will turn Walter Williams’ joke into reality.

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Like most libertarians, I’m a bit quirky.

Most people, if they watch The Great Escape or Rambo II, cheer when American POWs achieve freedom.

I’m happy as well, but I also can’t stop myself from thinking about how I also applaud when a successful taxpayer flees from a high-tax state to a low-tax state.

It’s like an escape from oppression to freedom, though I confess it might not be the best plot for a blockbuster movie.

In any event, here are two recent feel-good stories about this phenomenon.

Here’s a report about two members of the establishment media who are protecting their family’s finances from greedy Connecticut politicians.

After reports that married MSNBC anchors Joe Scarborough and Mika Brzezinski have been mysteriously broadcasting their show from Florida — sources speculated that the location is to benefit Scarborough’s tax situation. The “Morning Joe” anchors have been reportedly on a home set in Jupiter, Fla., but using Washington, DC, backdrops. Sources said the reason for the locale was a “tax dodge” — albeit a completely legal one — since Scarborough has a home in Florida and would need to spend a certain amount of the time there for any tax benefit. …Scarborough, who’s still presently registered to vote in Connecticut., on Oct. 9, 2018 registered to vote in Palm Beach County, Fla. according to public records. …By moving to Florida, he’d reduce his tax burden by roughly $550,000. Scarborough reportedly makes $8 million a year and would pay 6.99-percent state income tax in Connecticut, while there’s no state income tax in Florida, the Post’s Josh Kosman reports. To qualify as a Florida resident, he’d need to be there 183 days a year.

According to the story, Scarborough and Brzezinski are only making the move to be close to aging parents.

That certainly may be part of the story, but I am 99.99 percent confident that they won’t be filing another tax return with the Taxnut State…oops, I mean Nutmeg State.

Meanwhile, another billionaire is escaping from parasitic politicians in New York and moving to zero-income tax in Florida.

Billionaire Carl Icahn is planning to move his home and business to Florida to avoid New York’s higher taxes, according to people familiar with the matter. …The move is scheduled for March 31 and employees who don’t do so won’t have a job… Hedge fund billionaires have relocated to Florida for tax reasons for years — David Tepper, Paul Tudor Jones and Eddie Lampert being among the most prominent. But Florida officials have been aggressively pushing Miami as a destination for money managers since the Republican-led tax overhaul. …Florida is one of seven states without a personal income tax, while New York’s top rate is 8.82%. Florida’s corporate tax rate is 5.5%, compared with 6.5% in New York. Icahn’s move was reported earlier by the New York Post. The difference could mean dramatic savings for Icahn, who is the world’s 47th richest person.

These two stories are only anecdotes. And without comprehensive data, there’s no way of knowing if they are part of a trend.

That’s why the IRS website that reports the interstate movement of money is so useful (it’s not often I give the IRS a compliment!). You can peruse data showing what states are losing income and what states are gaining income.

Though if you want a user-friendly way of viewing the data, I strongly recommend How Money Walks. That website allows you to create maps showing the net change in income and where the income is coming from, or going to.

Since our first story was about Connecticut, here’s a map showing that the Nutmeg State has suffered a net exodus (red is bad) over the 1992-2016 period.

In other words, the state is suffering from fiscal decay.

And here’s a map for New York, where we see the same story.

Now let’s look at the state that is reaping a windfall thanks to tax refugees.

Florida, to put it mildly, is kicking New York’s derrière (green is good).

And you can see on the left side that Florida is also attracting lots of taxpayers from New Jersey, Illinois, Pennsylvania, and Connecticut.

By the way, some of my leftist friends claim this internal migration is driven by weather. I suspect that’s a partial factor, but I always ask them why people (and their money) are also migrating out of California, where the weather is even better.

P.S. Tax migration is part of tax competition, and it’s a big reason why left-wing governments sometimes feel compelled to lower taxes.

P.P.S. When the IRS releases data for 2017 and 2018, I’m guessing we’ll see even more people escaping to Florida, in large part because there’s now a limit on deducting state and local taxes.

P.P.P.S. I also cheer when people escape high-tax nations.

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My friends on the left hold two impossible-to-reconcile views about taxation.

  • First, they say taxes don’t really have any effect on incentives to work, save and invest, and that governments can impose high tax rates and punitive double taxation without causing meaningful economic damage or loss of national competitiveness.
  • Second, they say differences in taxes between jurisdictions will cause massive tax-avoidance behavior as jobs and investment migrate to places with lower taxes, and that national and international tax harmonization is required to prevent that ostensibly horrible outcome.

Huh?!? They’re basically asserting that taxes simultaneously have no effect on taxpayer behavior and lots of effect on taxpayer behavior.

Well, they’re half right.

Taxpayers do respond to incentives. And when tax rates are too high, both money and people will escape high-tax regimes.

In other words, people do “vote with their feet.”

And it seems pro athletes are not “dumb jocks” when contemplating the best places to sign contracts.

Looking at baseball, taxes presumably had an effect on Bryce Harper’s decision to play for the Phillies.

For Major League Baseball players, three teams are at the bottom of the standings on state taxes: the Los Angeles Dodgers, San Diego Padres and San Francisco Giants. That’s because California is in a league of its own on personal income taxes. We’ve got by far the highest state rate in the nation, topping out at 13.3%. By contrast, Pennsylvania has a low flat rate for every taxpayer regardless of income. It’s just 3.07%. That’s one reason why superstar slugger Bryce Harper signed an eye-popping 13-year, $330-million contract last week with the Philadelphia Phillies, spurning the Dodgers and Giants. …Harper will save tens of millions in taxes by signing with the Phillies instead of a California team. …“The Giants, Dodgers and Padres are in the worst state income tax jurisdiction in all of baseball,” Boras adds. “Players really get hit.” …To what extent do California’s sky-high taxes drive players away? “It’s a red light,” agent John Boggs says. “I’ve had players in the past say they don’t want to go to certain states because they’re going to get hammered by taxes. Obviously, that affects the bottom line.”

Another argument for states to join the flat tax club!

If we cross the Atlantic Ocean, we find lots of evidence that high tax rates in Europe create major headaches in the world of sports.

For example, I’ve previously written about how the absence of an income tax gives the Monaco team a significant advantage competing in the French soccer league.

And there are many other examples from Europe dealing with soccer and taxation.

According to a BBC report, we should highlight the impact on both players and management in Spain.

Ex-Manchester United boss José Mourinho has agreed a prison term in Spain for tax fraud but will not go to jail. A one-year prison sentence will instead be exchanged for a fine of €182,500 (£160,160). That will be added to a separate fine of €2m. …He was accused of owing €3.3m to Spanish tax authorities from his time managing Real Madrid in 2011-2012. Prosecutors said he had created offshore companies to manage his image rights and hide the earnings from tax officials. …In January, Cristiano Ronaldo accepted a fine of €18.8m and a suspended 23-month jail sentence, in a case which was also centred around tax owed on image rights. …Another former Real Madrid star, Xabi Alonso, is also facing charges over alleged tax fraud amounting to about €2m, though he denies any wrongdoing. Marcelo Vieira, who still plays for the club, accepted a four-month suspended jail sentence last September over his use of foreign firms to handle almost half a million euros in earnings. Barcelona’s Lionel Messi and Neymar have also found themselves embroiled in legal battles with the Spanish tax authorities.

Let’s cross the Atlantic again and look at the National Football League.

Consider Christian Wilkins, who was just drafted in the first round by the NFL’s Miami Dolphins. He’s very aware of how lucky he is to have been picked by a football team in a state with no income tax.

The Miami Dolphins picked Clemson defensive tackle Christian Wilkins with the 13th overall pick in Thursday night’s first round of the NFL draft. …He’ll be counted on to help usher in a new era of Miami football under first-year head coach Brian Flores. …Wilkins said he “knew they were interested” in him and is happy to be headed to Miami. He also joked that he’s happy he’ll be playing football in Florida, where there is no state income tax. “Pretty excited about them taxes,” he said. “A lot of guys who went before me, I might be making just a little bit more, but hey, it is what it is.”

As he noted, his contract may not be as big as some of the players drafted above him, but he may wind up with more take-home pay since Florida is a fiscally responsible state.

College players have no control over which team drafts them, so Wilkins truly is lucky.

Players in free agency, by contrast, can pick and choose their new team.

And if we travel up the Atlantic coast from Miami to Jacksonville, we can read about how the Jaguars – both players and management – understand how they’re net beneficiaries of being in a no-income tax state.

Hayden Hurst got excited after he received a phone call from someone he trusted who told him the Jaguars were targeting him with the No. 29 overall pick. …Though Hurst…was happy when the Baltimore Ravens took him four slots before the Jaguars, he also knew in advance of the financial consequences that most rookies don’t notice. Since Florida is one of four NFL states (Tennessee, Texas and Washington being the others) with no state income tax, Hurst, who played at South Carolina, understood he’d see a big chunk of his $6.1 million signing bonus disappear on the deduction line when he received his first bonus check. …“I thought about how much of my money was going to be impacted depending on which state I played in,” Hurst said. “I’m paying a pretty hefty percent up in Maryland. To see the amount get taken away right off the bat kind of hurt, it was pretty sickening.” With the NFL free agent market set to open Wednesday, Hurst’s situation illustrates a potential competitive advantage for the Jaguars of being in an income tax-free state when they court free agents.

Yes, the flat tax club is good, but the no-income-tax club is even better.

I’ll close with an observation. Way back in 2009, I speculated that high tax rates could actually hurt the performance of teams in high-tax states.

It turns out I was right, as you can see from academic research I cited in 2017 and 2018.

The bottom line is that teams in high-tax states can still sign big-name players, but they have to pay more to compensate for taxes. And this presumably means less money for other players, thus lowering overall quality (and also lowering average win totals).

P.S. I normally only cheer for NFL athletes who played for my beloved Georgia Bulldogs, but I now have a soft spot in my heart for Christian Wilkins (just like Evan Mathis).

P.P.S. I also have plenty of sympathy for Cam Newton, who paid a tax rate of almost 200 percent on the income he earned for playing in the 2016 Super Bowl.

P.P.P.S. Taxes also impact choices on how often to box and where to box.

P.P.P.P.S. And where to run track.

P.P.P.P.P.S. And where to play basketball.

P.P.P.P.P.P.S. While one can argue that there are no meaningful economic consequences if athletes avoid jurisdictions with bad tax law, can the same be said if we have evidence that high tax burdens deter superstar inventors and entrepreneurs?

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