Basketball is not my sport of choice, so I had no vested interest in the outcome of the recent drama surrounding LeBron James. Even though I still consider Florida my home state, I don’t care that he’s chosen to play in Miami. I am, however, struck by the degree to which LeBron’s decision mirrors that of so many ordinary Americans and businesses. Namely, I note that he’s spurned high tax jurisdictions for income-tax free Florida.
Obviously, LeBron made his decision on more than just economic factors, though it’s fair to say that pay and other monetary factors mattered to some degree. Although the sports community narrative involves James joining basketball super stars Wayne and Bosh – as well as some cries about the fairness of this team construction – the fact that all came together in Florida shouldn’t come as any surprise. From 1999-2008, more Americans have migrated to the zero-income-tax-having Sunshine State than any other. Meanwhile, the other states involved in the LeBron saga – Ohio, Illinois and New York – are 3 of the bottom 6, with more Americans fleeing New York than any other state in the union.
These patterns should not come as any surprise when you contrast Florida’s lack of an income tax with the top marginal rates of Ohio (7.93%), Illinois (3.0%) and New York (12.62%). But perhaps more importantly is the degree to which businesses are motivated by the same considerations. Corporate taxes and regulatory environments shape corporate decisions every day, with states like New York and California increasingly driving businesses away as they look for more favorable environments. This kind of tax competition is an important check on bad government policy, but it can be painful when you’re in one of the states being driven into the ground by short-sighted politicians. While LeBron James just might have considered these factors in his decision, that ordinary Americans and businesses do is without question – and the consequences for high tax jurisdictions are as clear as Cleveland’s outrage.
Cross-posted at Conservative Compendium.