Friday, July 23, 2010

Why State Tax Policy Was Not a Major Factor in LeBron's Move to Miami

I had been working on a lengthy post titled "Of NBA Free Agency and State Income Taxes" in which I responded to this Weekly Standard column. But some of my key points were not well supported and writing it was taking way too long, so I decided not to finish it. Instead, I'll just give you the part of that post in which I refute the meme that the lack of a state income tax in Florida was a major factor in LeBron James's decision to sign with the Miami Heat. I don't buy this argument for three reasons:

  • The amount of money that LeBron will save in state income taxes is less than the amount he gave up when he decided to leave Cleveland, especially for a team that has to pay two other top-level salaries. (The NBA's Collective Bargaining Agreement allows a player's current team to offer him a larger contract than his other suitors.)

  • LeBron wanted to play with Dwyane Wade and Chris Bosh and had been planning to do so for at least two years. Miami was the only team with enough cap space and flexibility to sign all three.

  • If playing in a state without an income tax were a major draw for NBA free agents, Memphis would attract a lot more high-profile free agents. The Grizz have signed exactly one notable free agent since moving to the Volunteer State: Rudy Gay, whom they signed to a five-year, $82 million contract this summer. Gay is a fantastic young player, and many in the media were surprised that Memphis signed him so quickly, but a) Gay was already in Memphis, b) he was a restricted free agent, and c) at the time of his signing the T-Wolves were the only other team to have expressed interest (though I'm sure that the Knicks, Nets, and Clippers would have been interested after they failed to land LeBron, Wade, and Bosh).

At any rate, if Florida's tax policy played any role in LeBron's decision it was far less a factor than playing with Wade and Bosh on a team with the cap space to sign all three, having a good opportunity to win multiple championships in the near future, Pat Riley, Miami weather, and Miami nightlife.


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