The King has left the building. A few weeks ago NBA star LeBron James devastated Cleveland fans with his announcement that he's leaving town to play for the Miami Heat. James is taking his talent to the Sunshine State in hopes of capturing his first NBA championship.
Or so he says.
Though LeBron cites the formation of a potentially unstoppable trio with two other NBA greats, Dwyane Wade and Chris Bosh, there might be another reason LeBron settled on the Heat that has more to do with dollars and cents than with slam dunks and three-pointers: Florida has no state income tax. It doesn't take long to realize that the Heat are offering LeBron literally millions of reasons to make the move south.
According to The Wall Street Journal, LeBron is trading in Ohio's 7 percent income tax rate for a potential $6-8 million in saved earnings by living in Miami. Even if LeBron isn't being sized for a new championship ring next spring, he'll still have plenty to smile about.
Using LeBron-onomics, it's no surprise James turned down other potential offers from New York and New Jersey teams. To the disappointment of Knicks and Nets fans, these franchises boast state and city taxes of 12.85 percent and nearly 9 percent respectively. The New York Post estimated that a LeBron-Knicks partnership would cut $12 million from James' bank account. Numbers like that aren't likely to put LeBron in a New York state of mind.
Yet LeBron isn't the only one anxious to make the Florida switch. Rush Limbaugh did a little calculating himself when he sold his New York City penthouse to escape the state's high taxes. The conservative commentator voiced his disapproval of the state's decision to implement an income-tax surcharge to raise $3 billion from New York taxpayers. Now he's backing up his statements by making his beach mansion in Palm Beach his primary residence (after he pays the more than $300,000 in real estate transfer fees he'll owe the city and state following the sale of his New York property).
If New York needs a lesson in attracting top income earners they need only look to their neighbors. Connecticut is one state that's figured out just how important state income taxes can be to companies and individual taxpayers contemplating relocations, and they're using this breakthrough to attract new business to the state.
Connecticut Gov. Jodi Rell singled out New York-based hedge funds as a potential boost to her state's economy. Amid New York's decision to raise the tax liability of hedge fund professionals, Rell sent a personal letter to the New York Hedge Fund Roundtable urging them to set up shop across the border.
The governor highlighted Connecticut's 6.5 percent top income tax rate and, according to the Journal, wrote in her letter that "short-sighted decision have long-term consequences. That understanding is the hallmark of good decision-making in any business."
Governments at all levels can only take advantage of the nation's LeBrons for so long before the market produces a better location for them to ply their trade. For policymakers, LeBron is more than just a basketball player; he's a new financial adviser.
Arizona lawmakers should take note of the Lebron-onomic phenomenon. Tax rates are important. Long gone are the days when companies were tethered to one geographic location. Arizona is in a pitched battle with other states and other countries to keep good jobs within our borders and to attract new ones. Companies today have choices as to where they set up shop and a state's tax environment factors into that decision. High taxes spurn jobs, they don't help create them.
The Arizona Chamber of Commerce and Industry is committed to advancing Arizona's competitive position in the global economy by advocating free-market policies that stimulate economic growth and prosperity for all Arizonans. Reach them at http://www.azchamber.com.