Californian Income Taxes Driving Out Sporting Stars

by Leroy Baker, Tax-News.com, New York

25 August 2005

High-earning Californians like golfing star Natalie Gulbis are leaving the state in droves before the tax collectors can bite into their earnings; they go to Nevada, Florida or other low-taxing states.

Highly productive citizens are fleeing California's confiscatory taxes, says Dan Mitchell of the Heritage Foundation: 'A number of professional athletes have left California to escape high tax rates, according to a story from Sacramento. The class warfare left naively thinks higher tax rates translate into more money to waste on government programs, but this is not true if the "geese that lay the golden eggs" can fly across the border to no-income tax states like Nevada. This is one of the strongest arguments for federalism. When there is an all-powerful central government, it is harder for people to escape bad policy. But when government operates at the state and local level, tax competition (as manifested by the ability to move to other jurisdictions) is a valuable constraint on greedy politicians and interest groups.'

Recently Californian golfing star Natalie Gulbis won $272,723 for a 4th place in the LPGA Women’s US Open at Cherry Hills, her best result to date. But with career earnings of $1.5m so far and her best earning years ahead of her, Gulbis has moved to Nevada, so that California won't see a cent of her winnings.

Fellow Californian golfer Scott McCarron has clocked up more than $9 million in earnings and lives in Reno, Nevada. The biggest golfing Californian of them all is Tiger Woods, and he went to Florida in 1996 after bagging a $40m deal with Nike. This year Tiger has made more than $60m from tour earnings alone. At California's current top income tax rate of 9.3%, that's more than $5m that won't be coming the Gubernator's way.

Surprisingly, Californian income tax rates have actually gone down: there used to be 10% and 11% income tax bands, and a Democratic initiative in the California Assembly seeks to reinstate them in order to bolster education spending.

Recommended