Why Derek Jeter and LeBron James Are Running for Florida
September 24, 2010
The New York Yankees' star shortstop Derek Jeter has become the latest to flee the Empire State, making Florida his new permanent place of residence. The reason for this move has little to do with his loyalty, or lack thereof, to New York. Rather, it is likely a simple calculation: New York City is among the highest taxed places in the United States, including hefty state and city income taxes. Florida, on the other hand, does not have an income tax, so Jeter, whose contract pays him $18.9 million annually, will be able to save a bundle, says Jim Powell, a senior fellow at the Cato Institute.
According to the Empire Center research organization, over 1.5 million more people moved out of New York state in the past decade than moved in -- a larger net loss than for any other state. Like Jeter, people moving out tend to earn higher incomes than people moving in. Two months ago, basketball superstar LeBron James made a similar decision. James was expected to make $100 million with a five-year contract in Miami, and because Florida does not have an income tax, the estimated net present value of his tax savings is between $6 million and $8 million, says Powell.
These cases offer a reminder of the futility of trying to soak the rich.
- According to the Commerce Department's Bureau of Economic Analysis, U.S. citizens and U.S.-based multinational corporations hold $18 trillion of assets offshore.
- Politicians complain some of that capital should be brought home to fund jobs in America, but if that happened, the Internal Revenue Service (IRS) would impose a 35 percent tax, so the capital stays offshore.
Source: Jim Powell, "Why Derek Jeter and LeBron James Are Running for Florida," Cato Institute, September 22, 2010.
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