Consumers respond to incentives. States competing with each other for individual tax revenue is a net plus. Sadly, the .gov will just bail them out when they fail.
Is Lefty’s stance on California’s tax hikes a sign of things to come for millionaire athletes?
The Golden State’s new 13.3 percent income tax on top earners prompted golfer Phil Mickelson to say earlier this month he was considering a move, and according to the accountants who advise millionaire athletes, he was just saying what a lot of jocks were already thinking. Federal taxes on the top income bracket just rose by roughly 5 percent, and, while there’s nothing rich athletes can do about that, they are paying attention to which states dip into their game checks — and how much they take.
“They’re going to have an exodus of people,” said John Karaffa, president of ProSport CPA, a Virginia-based firm that represents nearly 300 professional athletes, primarily in basketball and football. “I think they’ll see some [leave California] for sure. They were already a very high tax state and it’s getting to a point where folks have to make a business decision as well as a lifestyle decision.”[…]
California takes 13.3 percent on income above $1 million, but states like Florida, Nevada and Texas are among seven that take nothing.
It adds up, says Karaffa. As tax season enters full bloom, he expects to see an uptick in the number of clients who will consider leaving California. Under a hypothetical calculation, the tax difference for a single professional athlete making roughly $10 million a year between being a resident of California versus Florida is around $800,000 annually.
“They’ll start to see it more from paycheck to paycheck,” Karaffa said of the state’s tax bite. “And it’ll actually help my practice because guys will ask more questions and be more attuned to this. You’ll see more attention paid from professional athletes to their taxes this year because this is their largest expense.”
Largest expense… well, taxes and diamond crusted neck chains.