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Posts Tagged ‘Soccer’

I’ve never figured out why soccer is so popular in some parts of the world. What’s the point of watching people run up and down a field for 90 minutes when the result is usually a 0-0 tie?

But non-Americans generally don’t get the point of baseball, so I guess it’s all a matter of background and taste.

I mention soccer because it’s an excuse to write about competitiveness and taxation. Except I’m not going to write about low tax rates and job creation, or low tax rates and capital formation. Instead, today’s topic is tax competitiveness and French soccer.

And since the French care about soccer, maybe this will be a valuable opportunity to teach them why high tax rates are a bad idea in all areas.

Though you won’t be surprised to learn that the French government is on the wrong side.

Here’s how the New York Times begins a story.

Monaco may seem almost comically tiny, less a real country than a glorified safe deposit box festooned with palm trees and Lamborghini dealerships, but it teems with interesting statistics. Population: 35,427. Number of nationalities represented: 125. Unemployment rate: 0 percent. Income tax rate: 0 percent.

So far, so good. I’ve written favorably about Monaco and I have no objection to this description.

Monaco SoccerAnd it seems that Monaco’s fiscal policy is good for the local soccer team.

…a potash fertilizer tycoon…in 2011 expressed his support for his adopted country by buying a majority stake in its struggling soccer team, A.S. Monaco, and proceeding to aggressively vacuum up expensive European players. …Monaco is different from other countries. Rybolovlev can offer players…liberation from the petty annoyance of income tax. This is a happy prospect no matter what you earn; it begins to look like bliss when you count your income in millions.

But it seems there’s a controversy in this fiscal paradise. Or, to be more accurate, there’s a controversy in the tax hell next door.

…it puts the rest of the French league at a significant disadvantage. While Monaco basks in its special tax status, players for French teams are subject to the kind of high tax rates that recently motivated the actor Gérard Depardieu to renounce his citizenship… It’s like having a major league baseball team in the Cayman Islands.

Gee, what a surprise. The French are complaining that lower tax rates are an “unfair” form of tax competition.

So how did the French react? By engaging in their true national sport – imposing higher taxes.

The French soccer league has grumbled about Monaco’s exceptional situation in the past. But now, alarmed by the team’s sudden winning streak and unnerved by its 120 million-or-so euro (about $157 million) acquisition of three great players — João Moutinho and James Rodríguez from Porto and Radamel Falcao from Atlético Madrid — it finally did something. In March, it decreed that starting next June, any team playing in the French league would have to be based in France and subject to French taxes. For “any team,” read “Monaco.”

Naturally, their “solution” is to impose higher taxes in Monaco, not to lower taxes in France. At least the Spanish government, when confronted by competition from soccer clubs in other nations, created a special low-tax regime for soccer players.

That’s not the right answer. There should be low tax rates for all. But a special loophole for soccer players is a “far-less-worse” approach than what France is doing.

It’s also worth noting that the French approach won’t work. I’m not saying they can’t impose higher taxes on the Monaco soccer team.

But I am saying that the French soccer league will continue to lose top players so long as the government has a punitive 75 percent tax system.

Entrepreneurs are escaping France. Actors are escaping France. And now top soccer players have a big tax incentive to play other places other than France (or Monaco).

P.S. Speaking of soccer, you probably won’t be surprised to learn that ordinary people were screwed over at the last World Cup in order to benefit the rich elitists in private jets who like to lecture the rest of us about our carbon footprints.

P.P.S. It has nothing to do with public policy, but I was amused that the United States advanced farther than France at the last World Cup.

P.P.P.S. Returning to the realm of public policy, the statists in Europe have decided that free soccer broadcasts are a human right.

P.P.P.P.S. The United Kingdom also has lost high quality players because of excessive taxation.

P.P.P.P.P.S. Since I’m writing about sports, I suppose this is a good opportunity to pat myself on the back by sharing this award from last weekend’s tournament. I came to the plate 22 times and came away with two home runs, eight doubles, six singles, and a walk, while scoring 15  runs and driving in 16 RBIs.

Salem Offensive MVP

I’ve had plenty of bad softball performances over the years, but fortunately they never give awards for screwing up.

Now if I can merely convince politicians to reduce the burden of government spending, I’ll be able to say 2013 was a good year.

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I don’t particularly like soccer and I’m not normally a fan of the research of Professor Emannuel Saez, so it is rather surprising that I like Professor Saez’s new research on taxes and soccer.

While Saez may have a reputation for doing work that often is used by advocates of class warfare, his latest research is classic, supply-side economics. He and his co-authors studied soccer players and found that they are very sensitive to marginal tax rates.

They even confirmed that the Laffer Curve is sometimes so strong that governments can collect more revenue by reducing tax rates on the rich. Krugman won’t be happy about this.

Here are some segments from a story about the research in the Christian Science Monitor.

…on one subject, Europe’s soccer stars have an important message for Americans: Tax rates. It turns out that highly paid soccer players are sensitive to taxes. They tend to move to those nations that give them a break. Why is Spain’s top league a sudden soccer powerhouse? One reason is tax policy. Why are Denmark and Belgium’s leagues stronger than in other similar countries? Ditto. In perhaps the first study to provide compelling evidence of a link between tax rates and worker migration, three economists look at this highly paid, highly mobile workforce and make several surprising conclusions: 1) Top marginal tax rates matter to big earners. 2) If you’re going to cut taxes to lure such highly skilled workers, make it a big tax cut. Otherwise, it won’t have much effect. …Professor Saez and his colleagues found something striking: The leagues in low-tax nations attracted better players and had better teams. The effect was also pronounced in individual nations that reformed their taxes. For example, Spain in 2004 introduced a new flat rate of 24 percent for foreign soccer players, nearly half the top marginal rate it charged its residents. After that law – called the “Beckham law” because British star David Beckham took advantage of it – Spain saw its share of foreign players increase while the foreign talent in nearby Italy shrank. Tax cuts for foreign players in Denmark and Belgium had similar effects.

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Forget the Magna Carta and the Constitution. Don’t pay attention to the end of slavery. Ignore the defeat of the Nazis or the collapse of the Soviet Empire.

If you want a real victory for humanity, European courts have ruled that people have the right to free soccer games on TV. Apparently, people are now “entitled” to anything that is “of major importance” to society.

Isn’t that just peachy? Europe is slowly collapsing under the weight of the welfare state. Nations such as Greece and Portugal already have reached the point of fiscal collapse. But rather than address these problems, the political elites at the European institutions have decided on a modern-day version of bread and circuses for the masses.

Here’s a blurb from the Financial Times.

European countries are entitled to ban the exclusive airing of World Cup and European football championship games on pay-TV in order to allow wider public viewing on free channels, one of Europe’s top courts has ruled. The ruling is a blow for Fifa, which organises the World Cup finals, and Uefa, which handles the European Football Championship finals. Both organisations depend heavily on the sale of broadcasting rights for much of their income and had challenged the extent to which games had to be shown more widely. But on Thursday the General Court in Luxembourg slapped down their arguments and ruled in favour of Belgium and the UK, which had included games organised by Fifa or Uefa on their lists of events they considered to be “of major importance” to society and so entitled to wider audiences.

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Thanks to Instapundit for drawing attention to this Financial Times report showing how ultra-rich elitists and politicians flew to South Africa on private jets, which meant both big carbon footprints and also resulted in ordinary people missing a key soccer match because the airport was too cluttered for many commercial planes to land. The Hypocrite-of-the-Year Award goes to Leonardo DiCaprio, who piously lectures ordinary people about how they should be good environmentalists (translation: pay higher energy taxes and reduce travel), but then engages in Al Gore-style global jet setting.
Hundreds of fans bound for Durban for the Germany-Spain World Cup semi final missed the game because their flights were unable to land, after air traffic authorities closed the city’s airport because of congestion on the runway caused by private aircraft. …Wire services reported that among the VIPs heading for the semi-final by jet were Spain’s King Juan Carlos, South African President Jacob Zuma, actor Leonardo DiCaprio and socialite Paris Hilton. The BA pilot, who held his plane for around 45 minutes above Durban in the vain hope of getting a landing slot, told passengers he had no choice but to take the plane to Johannesburg because the plane’s fuel was starting to run low. He announced that the problem was caused by the airport allowing too many private jets to land at Durban, leaving the runways clogged up and unable to accept scheduled flights. Confusion was heightened at OR Tambo airport by the lack of any senior officials to explain the problem. One junior official said she believed around 15 scheduled flights, mostly from Johannesburg, were unable to land in Durban.

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I’m not a soccer fan, but I’m nonetheless disappointed that the American team lost. Having said that, at least we got farther than a certain team from a socialist nation (not that we can point too many fingers in that regard after what Bush and Obama have done). So in honor of the World Cup, here’s an image of a recent Wall Street Journal story.

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For the first time in my life, I enjoyed reading a story about soccer. But not because of the sport, but rather because it is very amusing to read about the exodus of top-flight players from England’s Premier League as they escape Prime Minister Brown’s spiteful increase in the top tax rate. The Weekly Standard has the amusing details:

The English Premier League has dominated European soccer in recent years. Nine of the last 12 Champions League semifinalists have come from the Premier League, and an English team has been in the final for each of the last five years (two played each other for the trophy in 2008). The Premiership’s top teams–Manchester United, -Arsenal, Chelsea, and Liverpool–are four of the sport’s ten glamour franchises, and the league is easily soccer’s richest. Yet over the last few months, star players have been rejecting offers from the Premier League hand over fist. …Why have players been rejecting hefty fees to play in the world’s most celebrated soccer league? It’s all Gordon Brown’s fault. In April, the British government passed a measure that increases Britain’s top tax rate from 40 percent to 50 percent. The enormous hike applies not just to wealthy soccer stars (the average base salary for a Premier League player is £1.1 million a year) but to anyone making over £150,000. When the tax increase first passed Arsenal striker Andrei Arshavin demanded that the team renegotiate his contract, calling the hike an “unpleasant surprise.” Ronaldo’s agent noted that it would mean an extra £670,000 a year in taxes for the star (who was then still with Manchester United). Arsène Wenger, the manager of Arsenal, matter-of-factly explained that the higher taxes would decimate British professional soccer. “[W]ith the new taxation system, with the collapse of sterling, the domination of the Premier League on that front will go,” Wenger told the Times of London. “That is for sure.” The move is part of Brown’s effort to soak the rich in order to make up for revenues lost in the recession. Three-hundred thousand Britons will be affected by the increase, which is expected to raise an extra £2.1 billion. Which hardly seems worth the bother, because Brown’s plan also involves borrowing some £600 billion over the next five years and bringing Britain’s public debt to 79 percent of GDP by 2013. The result is that Britain’s tax rate is now the highest in the professional soccer world. In Italy, players pay 43 percent on income. In Germany, 45 percent. In France, 40 percent. In Russia, only 13 percent. But the real winner is Spain. Spain’s top tax rate is 43 percent. In 2005, however, Spain amended the law to include a provision for high-earning “foreign executives,” which would require them to pay only 24 percent. …Deloitte Sports Business Group estimates that between the falling pound, the higher British tax rate, and the Spanish tax break, U.K. clubs would have to pay 70 percent more in order to match a player’s take-home pay in Spain. Predictably, no one is happy with the situation. British papers are full of stories lamenting the demise of the Premier League. Also predictably, Britons seem more outraged by Spain’s lower tax rate than by the increase in their own. …the purveyors of goo-goo pan-Europeanism have been affronted, too. Michel Platini, president of the Union of European Football Associations, claimed that there was something “abnormal” about the influx of talent to the Spanish league. “These transfers are a serious challenge to the idea of fair play and the concept of financial balance in our competitions,” Platini told reporters.

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