One of the key insights of good tax policy is that people respond to incentives. If tax rates are punitive, people will do what they can to protect themselves from predatory government.
Especially if they have any ability to control the timing, level, and composition of their income.
Star athletes are definitely in this group. They avoid states and countries governed by greedy politicians.
As reported by Edward Lewis of the New York Post, taxes were one of the reasons why Merrill Kelly signed to pitch this year for the Arizona Diamondbacks instead of the San Diego Padres.
Once California tax laws entered the equation, two was greater than three for Merrill Kelly. The math was done by the veteran pitcher at some point this offseason, when he was a free agent deciding between two options for his MLB future. No. 1 was a two-year, $40 million contract with the Diamondbacks. No. 2, at least on paper, seemed better. It was a three-year, fully guaranteed deal with the Padres that appeared to have a similar average annual value. Kelly, though, chose the former — and…he explained the decision was almost entirely due to the Golden State’s tax system. “I don’t think it’s any secret on how much money you get taken out of your pocket when you go to California,” the 37-year-old right-hander said. …Kelly made it crystal clear that giving away a significant portion of his income to a state government was ultimately a dealbreaker for him. “I love San Diego,” Kelly said. “It’s just, like I said, they take too much money out of my pocket, man. The taxes over there are a different level.
Kelly didn’t need any fancy tax accountants.
This chart has all the information he needed.
Taxes matter in nations as well.
Here are some excerpts from a column by Cláudia Ascensão Nunes for the Foundation for Economic Education.
Portugal is one of the national teams favored to win the 2026 FIFA World Cup. Yet most of the team’s players don’t play for Portuguese clubs. Despite producing world-class talent, the country faces difficulties in retaining it domestically. …Portugal ranks as the fourth-highest country in the European Union in terms of fiscal effort, a measure of the effective tax burden relative to income. …High earners face marginal income tax rates of up to 48%, with additional solidarity surtaxes applied to incomes between €80,000 and €250,000 and above that threshold. At the same time, clubs face a 23% value-added tax on ticket sales, reducing net revenue from their core activities, and are subject to the general corporate tax regime… Football makes visible a broader phenomenon that affects the entire Portuguese economy. Like players and coaches, engineers, doctors, and researchers frequently build their careers abroad, where they find more competitive economic and tax conditions. Today, approximately 30% of Portuguese citizens with higher education live outside the country, one of the highest rates among developed economies. Talent moves where incentives are strongest. As incomes rise, so does the tax burden, reducing Portugal’s relative competitiveness.
The last couple of sentences are key.
Because many people follow sports, they care about where star athletes play.
