LeBron’s Wise Decision

Not only will LeBron James win an NBA championship next year with the Miami Heat, but by signing with Miami, he saved himself millions of dollars in taxation.

From today’s Wall Street Journal:

We come not to praise or bury LeBron James, but only to note that by moving to Miami he’s going to save a bundle on taxes. We’ll take the King of ESPN’s word that he’s jumping to the Miami Heat from the Cleveland Cavaliers mainly for basketball reasons, but it is also true that Florida has no income tax. The rate in Akron, Ohio is a little over 7%.

Mr. James figures to earn close to $100 million in salary over five seasons in Miami. According to an analysis by Richard Vedder, an economist at Ohio University, Mr. 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. Professional athletes do have to pay other state taxes for the dates they play in visiting team arenas, but most of Mr. James’s considerable endorsement income would be taxed at Florida rates.

The tax comparisons looked even worse for two other teams in the LeBron bidding, the New York Knicks and New Jersey Nets. The New York Post estimated that New York City and state taxes of 12.85% on high income earners would have taken more than $12 million from Mr. James. New Jersey’s rate is nearly 9%. Both of those teams are lousy, but it can’t help their free-agent sales pitch to start out $9 billion to $12 billion in the after-tax hole.

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.

We feel for Cleveland fans, but maybe they should allocate some of their wrath to the state politicians who keep driving high-income individuals and their businesses to financially sunnier climes.

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3 Responses to LeBron’s Wise Decision

  1. Bill says:

    But couldn’t one argue he also made a bad decision? Say he wants to put his children through public school, would he rather do it in a state that is 16th in spending per pupil (Ohio), or 45th (Florida)?

    • Nick says:

      Seriously, Bill? The guy is 25 years-old.

    • DCG says:

      Any one making that kind of money will either home school or send their kids to private schools. His kids will end up better educated & his taxes will be much lower. Win win for his family.

      What stat do you cite and does it prove the more a state spends the higher graduation rates they have with higher SAT scores?

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