LeBronomics: Do Taxes Really Affect Location Decisions of High-Paid Workers?

Tax-induced mobility of superstars has recently been the subject of heated discussion after NBA free agent superstar player Lebron James decided to leave the Cleveland Cavaliers to play for the Miami Heat. Florida, many commentators objected, does not have any state income tax. His home state of Ohio, on the other hand, does and its highest individual income tax rate is about 6 percent. For the press, the diagnosis was clear: “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”. The same type of heated debate took place this year in the United Kingdom in connection with the increase in the top marginal tax rate from 40 percent to 50 percent. Arsene Wenger, the emblematic manager of Arsenal FC, commented on the UK tax reform by saying that “with the new taxation system, (...), the domination of the Premier League will go, that is for sure” (The Sunday Times, April 25, 2009).