The Beatles complained about 95% tax rate in England, French actor Gerard Depardieu gave up his citizenship for Russian citizenship after claiming he had “paid 85% taxes on his revenues this year ,” Lebron James gave up a couple of million dollars a year gross made made more net money after taxes by leaving Cleveland for Miami and then Phil Mickelson was attacked for considering leaving California due to what First Trust Advisors Chief Economist BrianWesbury calculates is a 74 percent tax rate after adding the death tax.
While Mickelson was attacked for considering leaving California rather than handing over most of his income to the tax man, athletes are simply joining the lead of musicians and actors who have fled states and countries for less oppressive tax codes.
It was the Beatles who sang, “There’s one for you, nineteen for me” in the song Tax Man in 1966 leading the way for rock stars from the British Invasion to give up their British Citizenship to save millions in taxes.
Actors have followed their lead.
French Prime Minister Jean-Marc Ayrault who called Depardieu “pathetic” for fleeing the country to avoid what he said was an 85 percent tax rate. Depardieu, who starred in 180 movies, moved to Belgium — partly to avoid the 75% income tax on the wealthy that was introduced by the socialist President of France,
Athletes, who typically earn big dollars for a much shorter number of years before they cannot compete at an elite level are simply making the same decision.
Years ago Tiger Woods quietly moved from California to Florida to avoid oppressive taxation. When Lebron James took a paycut to make “the decision” to leave Cleveland for Miami, he was leaving high taxes in Ohio and local taxes in Cleveland for Florida, which has no income tax.
However, it was Michelson who took the brunt of the attacks just for talking about making the move instead of quietly moving. Like many athletes who take the conservative position on any issue, he was attacked and backed off.
We close with a public statement by First Trust Advisors Chief Economist BrianWesbury:
Even if Mickelson retired from playing golf, he would earn enough from ads, appearances, and maybe golf-course design to put him in the top tax bracket. He would pay 39.6% in federal income tax and 13.3% in state taxes to California. Factoring-in the deductibility of state income taxes (as well as the “Pease” phase-out of those deductions), his combined tax rate is 49%. Medicare taxes push his marginal rate to 52%. So, the government takes more than half of what he earns. If we add sales taxes on consumption, the total moves to 55%.
But it gets worse. Mickelson already has enough wealth to satisfy him and his wife for the rest of their lives. So, in effect, he’s really just working for his kids. But his estate, which is grown using after-tax dollars (just 48% of income) will get taxed at a 40% rate when he dies. After this death tax, his children will be able to consume only 29 cents for every $1 their dad earned, 26 cents if we include California sales taxes.
No one is arguing his kids are headed for the poorhouse. But knowing how little extra spending he can generate from extra work, Mickelson and other high earners would be crazy not to consider “drastic changes.” When golfers, business executives, brain surgeons and many others retire early because of high tax rates, we all end up losing. We pay more for what they produce and the government gets less revenue.
“Free citizens have choices, like where to live and whether to work. When the government breaks the basic link between how much government costs and the benefits it provides to taxpayers, it is the government that should come under scrutiny, not the citizens that consider making changes to avoid the cost,” said First Trust Advisors Chief Economist BrianWesbury, who calculates that if Mickelson stays in California he will keep only 45 cents of every dollar he earns and pass on only 29 cents to children after the death tax.