Our current national confusion over wealth taxes serves only the wealthy.
Basketball fans have plenty of reason to laud LeBron James. This son of Akron plays the game of basketball at a level that thrills fans both casual and obsessed. LeBron the basketball superstar has led his teams to eight straight NBA championship finals. No other player has ever matched that stretch of relentless excellence.
LeBron the concerned citizen has given us reason to cheer as well. He ranks as one of the most woke stars in sports. On matters of social justice, LeBron has consistently refused to “shut up and dribble,” as Fox News host Laura Ingraham infamously advised him earlier this year.
Now LeBron has given us still another reason for cheering. He has just delivered a powerful anecdotal blow against plutocratic economic orthodoxy.
That plutocratic orthodoxy has always rested heavily on anecdotes. Ronald Reagan rode anecdotes into the White House. He delighted his right-wing faithful with an oft-retold tale of the “welfare queen,” an Illinois woman who parlayed welfare checks into luxury cars and piles of cash.
This Illinois woman, upon closer inspection, would turn out to be a professional con artist who went by dozens of different names. She did defraud the Illinois Department of Public Aid, the state’s “welfare department.” She also snookered Social Security, the VA, and businesses that ranged from Allstate Insurance to Amoco oil.
In other words, the Illinois story had little to do with welfare and everything to do with the vulnerability of large bureaucracies to the machinations of committed crooks. But Reagan knew the value of a colorful anecdote, and he used this one to make the case that “welfare” in America served only to enrich lazy good-for-nothings at the expense of hard-working taxpayers.
Reagan’s political gambit worked — and paved the way for a generation of cruel budget cuts to the social safety net that have left vulnerable kids and families without food, shelter, and sometimes even hope.
For cheerleaders of America’s deeply unequal social order, anecdotes actually do double duty. They don’t just help demonize the poor and programs meant to help them. Anecdotes can also help shield the nation’s most privileged, particularly at tax time.
Any attempt to raise taxes on America’s wealthiest, conservatives insist at every opportunity, will always backfire. The rich will simply exit any political jurisdiction that tries to raise their taxes, these fans of grand fortune claim, and they have the anecdotes to prove it — since people in real life exit one political jurisdiction for another all the time.
So finding a rich person who moves from a higher-tax locale to a lower-tax locale never poses much of a problem. Two years ago in New Jersey, for instance, Republican lawmakers used a local hedge fund kingpin’s 2015 move to low-tax Florida as a cautionary tale against an effort to raise taxes on their state’s wealthiest.
But research that looks at how the rich overall behave when their tax rates go up tells a completely different story. Our last quarter-century, as one Center on Budget and Policy Priorities analysis points out, has seen “a number of sophisticated statistical studies of the impact of state and local taxes on interstate migration of individuals and households.”
“Taken as a whole,” the Center analysis concludes, “the research strongly refutes the claim that state and local taxes have a significant impact on migration.”
And that brings us back to LeBron James. King James became a free agent after this past basketball season and could have chosen to sign with any team in the United States or Canada. If tax rates determine where extremely rich people choose to live, LeBron would have chosen anywhere in the country except . . . California.
California has America’s highest state income tax on high incomes, with a 13.3 percent levy on joint-return income over $1,074,996. That’s almost double the combined state-local income tax rate that LeBron, as a Cleveland Cavalier, has faced in Ohio over the past four years.
LeBron chose California anyway. He’ll play for the fabled — and lately troubled — Los Angeles Lakers franchise. LeBron will make $35.7 million this coming season, and his decision to decamp to California will cost him, a Forbes analysis details, somewhere between $2.2 million and $5.2 million more in taxes than he would have paid if he signed for the same $35.7 million with Cleveland.
LeBron, with this California-dreaming decision, has handed fans of progressive taxation a wonderful anecdote. Here, on America’s media center stage, we have a celebrity of ample means voluntarily — and enthusiastically — settling in a state that boasts America’s highest state tax rate. So much for the “iron law of exit” conservatives never tire of propounding.
LeBron James isn’t going to the Lakers, of course, because California has the nation’s highest state tax rate. He’s going for all sorts of other reasons. Life operates that way. Rich people make decisions on where to live based on many different factors. So do the rest of us.
To claim that tax rates determine these decisions, as opponents to taxing the rich claim, muddles the messiness of how human beings, rich and poor alike, make decisions. So thank you, LeBron, for this latest social slam dunk. Anecdotes may not thrill statisticians. They do move our political discourse.
Sam Pizzigati co-edits Inequality.org. His latest book, The Case for a Maximum Wage, has just been published. Among his other books on maldistributed income and wealth: The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970. Follow him at @Too_Much_Online.