Thursday, June 28, 2018

Boston Bernie Backers Probably Not Bashing Bruins

This post was originally published on Forbes Oct 5, 2015

When I was at the Bernie Sanders rally in Boston Saturday, I did not note anybody who was obviously a hockey fan.  I didn't think anything of it at the time, but this report by the Canadian Taxpayers Federation being promoted by Americans For Tax Reform might offer a clue.  The report is titled Major Penalty For High Taxes - How high-income taxes drive NHL players and high-income earners to lower tax jurisdictions.  The subtle message of the report seems to be that people need to be careful about supporting high taxes on top earners, because it might make the local teams suck.  Some might find the Bernie Sanders connection a bit tenuous, but I think there is something to it.  A bit of background is in order, but in something of a spoiler, I will say that this particular study is long on ideology and short on support for its conclusion.

Fandom In New England

This is an entirely unscientific impression, but I believe that the professional sports teams in Boston draw a bit more in the way of fanatical devotion from the people in the region than you see in other parts of the country. This is just an impression of mine from living most of my life in Central Massachusetts, but spending a good amount of time focused on Central Florida, while having grown up in the metro New York area.  Also I have a below normal interest in sports, but an above average interest in subtleties of regionalism.

It strikes me that in Florida the devotion goes more to college teams and that in New York identification with the teams is part of a more general sense of the superiority of all things New York.  Boston teams seem to inspire a different more intense loyalty and an intense antipathy to New York teams, that New Yorkers return with condescension. The big advantage I have taken of this is that when wandering around airports on my way home, I can usually find the right gate from the profusion of Boston team emblems on shirts and hats regardless of which of the four regional airports (Boston, Providence, Hartford, Worcester), I am aiming for.

Bernie's Boston Brigade

As I have tried to connect with the Sanders campaign locally, I found things just a bit chaotic, although the website is pretty good for finding local events.  Somebody who was running an organizing meeting in Worcester explained to me that the campaign is focused on New Hampshire and Iowa and that anything going on in Massachusetts (presumably prior to the rallies in Boston and Springfield on Saturday) is entirely grass roots.  This would cause some matters of more local interest to get swirled into the mix.  For example, one of the leadoff speakers Saturday evening in Boston was Jimmy O'Brien of the Carmens Union drawing attention to privatization of the MBTA, which he does not think is a good thing.

Most ubiquitous of the side activities was the collection of signatures for a ballot initiative to almost double the state income tax on people making more than a million dollars a year.  This was not an activity of the Sanders campaign, but more reflective of the grassroots concerns of local Sanders supporters.  My immediate thought was that unless you are on one of the East West thoroughfares you can't drive much over 40 miles in Massachusetts without crossing a state line or being blocked by a large body of water making millionaire flight somewhat easier than in some other areas.

Not being much of sports fan, the implications of the surtax for professional athletics did not cross my mind, but I now realize to a reflective Boston sports fan, the implications might seem enormous. Massachusetts at 5.15% is kind of middle of the road for state income taxes and a real bargain compared to New York and California (I'm over-simplifying a bit because the Massachusetts base is on the broad side).  A 4% add-on for millionaires would seriously erode the advantage.  The New York state top rate is 8.82% (The NYC rate of 3.876% might help, but not so much with football which is played in New Jersey).

Seems Like Athletes Might Pay Attention To State Tax Although Maybe Not That Much

The essence of the study is that professional athletes, in this case hockey players, do pay attention to state income tax, when they can.
Players want to play for certain teams for a lot of reasons; the weather, the coach, the other players on the team … but they also consider the taxes they will have to pay. Like everyone else, NHL players don’t just care about how much they get paid, but how much they get to keep. High taxes might prevent your team from getting that key player it needs, but they also stop other high income earners from moving to your city. 
The salary cap limits the ability of a wealthy team in a high-tax jurisdiction to attract top players by paying them more. The advantage of attracting players with higher pay shifts from wealthy teams to teams in low-tax jurisdictions.
Oddly enough the study does not really support its conclusion all that well, since as all sports savvy tax nerds know, state income taxes at some level are inescapable for professional athletes and the people promoting the study apparently did not have enough SALT geeks on staff to come up with a really good model.
The income tax calculations exclude “jock taxes,” which are additional income taxes charged by some American states on visiting playersPlayers may or may not be entitled to a tax credit in their home jurisdiction for the jock taxes paid elsewhere. Jock taxes make players’ taxes incredibly complicated — players may need to file more than a dozen tax returns.
The part of the study that will most interest a Bruins fan is on page 11, where teams are rated on the friendliness of the local tax environment with the Dallas Stars being the best deal and the Montreal Canadiens being the worst.  The Boston Bruins rank 11th out of 30 with the New York Islanders and the New York Rangers tied for 25th and 26th.

The study would be a lot stronger if somebody had taken the trouble to interview some agents and players, but I did not note anything like that.

How Well Does The Study Support Its Conclusion

The report is kind of long on ideology and short on strong evidence. For all its tables and graphs the data supporting the study's conclusion that tax rates are a really big deal to NHL players is based on pretty thin evidence.  Over some period of time, which did not jump out at me, players with "no-trade" clauses, who had greater control over where they might be traded had a 60% chance of going to a lower tax team, which is admittedly pretty impressive.  Free agents had a 54% chance of going to a lower tax team, which is hardly stunning.  Remember the NHL has a salary cap, so the theory is that the real salary cap is a lot lower in high tax jurisdictions.

Of course what fans care about is whether their teams are winning or in the case of Boston fans also whether the New York teams they hate are losing. The people promoting the high state income taxes are bad for your hockey team theory might be disappointed how last season went.  At the top of three divisions were teams from really bad tax environments (New York, Montreal and Anaheim).  If you took the trouble to correlate goals scored with friendliness of the tax environment, you would find the relationship was inverse.
If I was going to construct an ideological explanation for that apparent anomaly, it would be that people who are heavily influenced by the local tax environment in spite of individual excellence, might not be great team players.

In the end despite the warning of Americans For Tax Reform. Boston fans can rest easy for now about the Bernie backers promoting the millionaire tax.  It really might not be such a hot idea, but the all important fate of our professional sports teams probably does not hinge on it.

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