Mega-Rich Tired of Over-Taxation
Pro golfer Phil Mickelson’s illustrious career includes 42 wins on the PGA Tour, including five major championships: three Masters titles, a PGA Championship, and a U.S. Open Championship. On July 21, Mickelson scored his latest achievement, taking the 2013 British Open with a 5 – under 66 and thereby winning the third leg of his career Grand Slam. As you can imagine, he is one of the highest-compensated athletes in the U.S., ranked at # 7 by Forbes.com. It is estimated that Mickelson will make in excess of $21.2 million in 2013. Out of that, he will pay more than $5.2 million (13.3%) in state income taxes to his home state of California! Will he pull up stakes as he has hinted, and move to the zero-income-tax state of Florida, like Jack Nicklaus and Greg Norman before him? If listing most of his property for sale in California is any indication, it is only a matter of when, not if.
In 2012, Michael Jordan left Chicago and Illinois’ 10.2 percent state-local tax burden and is now set to move into his new $12.4 million mansion in Jupiter, Florida. This past October, New York Yankee great Derek Jeter finalized his permanent Florida residency with the sale of his multi-million dollar apartment in Trump World Towers in New York City. With an estimated $17 million salary due to Jeter in 2013, this move will save him nearly 9 percent in New York State personal income taxes alone.
Yet another example: After leaving the Cleveland Cavaliers in 2010, LeBron James is expected to make $100 million with a five-year contract in Miami, and because Florida doesn’t have a state income tax, the estimated net present value of his tax savings is between $6 million and $8 million. Along with superstar teammates Dwayne Wade and Chris Bosh, James helped the Miami Heat take the 2013 NBA National Championship.
One more very notable California expatriate superstar is none other than golf legend Tiger Woods. Woods recently reported that the reason he left California in the mid-nineties was specifically due to the high tax rates there. Needless to say, the personal income taxes in California have soared in the seventeen years since Woods took up permanent residency in Florida. His foresight was impeccable!
I think I have made my point: Mega-rich athletes are part of a long list of successful individuals who are flocking from high personal income tax states to no income tax states. These wealthy people are bringing along their families, assets, businesses, endorsement revenues, and earning potential. They are also leaving their former home states with a huge tax revenue void. Unfortunately, many governors and state legislatures are blind to the facts, or simply choose to ignore them.
The individuals I have listed came to Florida from states like California, Ohio, Illinois, and New York. But Florida is certainly not their only destination. Many have moved to other zero personal income tax states like Nevada and Texas.
I would be remiss if I did not mention just one more. Who do you know who has his own Boeing 707 parked in his driveway? How about John Travolta, who left Hollywood in 2003 to make Ocala, Florida, his primary residence?