Big Ideas: On basketball, prisons and Kansas

Published July 18, 2014 3:20pm ET



David Boaz for the Cato Institute: Do some people think taxes don’t affect economic choices? If so, they should talk to Trevor Ariza and the Washington Wizards. Ariza, a member of the Los Angeles Lakers’ 2009 NBA championship team and “a key part of the Wizards’ playoff run,” has decided to leave Washington and join the Houston Rockets. Why?

“Washington was disappointed but hardly shaken when Ariza chose to accept the same four-year, $32 million contract offer in Houston, where the 29-year-old could pocket more money because the state doesn’t tax income.”

Yes, a $32 million salary — or indeed a $32,000 salary — goes further in Texas than in the District of Columbia. What economists call the “tax wedge” is the gap between what an employer pays for an employee’s services and what the employee receives after taxes. … It causes some employees to flee to lower-tax countries, states or cities. The Beatles, the Rolling Stones, Bono and Gerard Depardieu are some of the better-known “tax exiles.” Now Trevor Ariza has joined their ranks.

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