Lefty's Laffer Curve
Golfer Phil Mickelson, aka “Lefty,” recently hinted that he was thinking of leaving California because of the high tax rates there that, combined with federal income and payroll taxes, make his tax rate (I’m pretty sure he meant marginal, not average) above 60 percent. He exaggerated but only slightly. Because he makes more than $1 million a year, his state marginal tax rate (MTR) is 13.3 percent. (I posted about this 2 months ago and understated the marginal tax rate: I will make the correction anon.) His federal MTR is 39.6 percent plus the ObamaCare 3.8 percent payroll tax, for a total MTR of 43.4 percent. Add those together and you get 56.7 percent. That’s close to 60.
In the same post I noted above, I predicted that a number of high-income people will leave California. It’s true that Phil Mickelson said he regretted his remarks. In a statement he released Monday, he said, “Finances and taxes are a personal matter and I should not have made my opinions on them public.” I don’t know why he shouldn’t have, but notice what he didn’t say: he didn’t say that he had decided not to move.
That high-income golfers take taxes into account in choosing where they live should not be surprising. Here’s a segment from an Associated Press story by Doug Ferguson:
A majority of PGA Tour players live in Florida and others in Texas, two states that have no state income tax. Tiger Woods grew up in Southern California and played two years at Stanford. He was a California kid when he won an unprecedented three straight U.S. Amateur titles, but when he made his professional debut in Milwaukee a week later, he was listed as being from Orlando, Fla.
“I moved out of here back in ’96 for that reason,” Woods said Tuesday.
“I enjoy Florida, but also I understand what he was — I think — trying to say,” Woods said of the Mickelson comments. “I think he’ll probably explain it better and in a little more detail.”
For those of you who don’t follow golf, this last quote from Tiger is quite striking: Tiger and Lefty do not like each other, to put it mildly. But I find it gratifying that implicitly Tiger is defending Phil’s right to legally keep as much of his income as he can.
One final note: I was disappointed to see this line from Mickelson’s statement: “I apologize to those I have upset or insulted, and assure you I intend not to let it happen again.” I’m sure that he upset people, but those people should deal with it. There’s no need for an apology. As for insults, I read the whole part of the conversation quoted and I couldn’t find a single insult. Mickelson was simply saying that he was going to respond to the incentives that Jerry Brown, California voters, President Obama, and Congress put in place.