Pro golfer looking for better greens after tax hikes take too much of his

posted at 2:31 pm on January 21, 2013 by Ed Morrissey

If one wonders what the difference is between static and dynamic tax analysis, Phil Mickelson gave a real-world example this weekend.  After tax hikes on big earners took place on both a federal and state level in California, the Golden State resident gave a big hint that he might either take his earnings somewhere else, or stop playing golf and rely on his investments:

Professional golfer Phil Mickelson told reporters Sunday that he is considering “drastic changes” in response to state and federal income tax hikes — including possibly leaving the United States.

“It’s been an interesting off-season. And I’m going to have to make some drastic changes. I’m not going to jump the gun and do it right away, but I will be making some drastic changes,” Mickelson said during a press conference following the Humana Challenge golf tournament in La Quinta, Calif.

When pressed by reporters about whether those “drastic changes” could include leaving California or even the United States, the four-time major championship winner didn’t foreclose the possibility. But he made clear the reason he is considering such drastic options is the massive tax burden he now shoulders.

“But if you add up, if you add up all the federal and you look at the disability and the unemployment and the Social Security and the state, my tax rate’s 62, 63 percent. So I’ve got to make some decisions on what I’m going to do,” said Mickelson.

In November, California voters approved Democratic Gov. Jerry Brown’s Proposition 30, which raised taxes on all state residents who earn more than $1 million in annual income. California now has the highest state income tax rate in the nation.

All right, class, here’s the lesson on tax analysis.  According to static analysis, used by proponents of tax hikes, raising the rate on people like Mickelson will derive a predictable amount of additional revenues because those proponents assume that the wealthy don’t have the resources or the intelligence to adjust to the new policy.  Dynamic tax analysis assumes that raising taxes will prompt the people with the most resources — like Mickelson — to change their behavior to meet the new tax environment.

Tax-hike proponents think California will get a bigger cut of Mickelson’s earnings.  Dynamic analysis proponents think California won’t get any of Mickelson’s earnings, because Mickelson’s likely to move to a state with no state income tax, or at least lower rates.  Which do you think is the more realistic assumption, and not just for Mickelson but for the rest of the well-resourced high-end earners looking for ways to minimize the bite on their checks? Oh, let’s not always see the same hands

The media reaction to this could best be described as mixed.  The Los Angeles Times’ Houston Mitchell lamented how difficult it was to generate sympathy for the rich, even as he admitted that Mickelson had a point:

It’s hard to feel sorry for a guy who has made more than $67 million in PGA Tour earnings (and that doesn’t even count millions more in endorsement deals), but you can sort of see his point. Phil Mickelson announced on Sunday that he will make “drastic changes” because of federal and California state tax increases.

Well, I don’t think Mickelson was looking for sympathy. I think he was explaining that he doesn’t have to put up with Jerry Brown’s tax hikes to fund a massively dysfunctional state government, and that he’s not likely to do so.  Fox Sports gave a much different take on Mickelson’s announcement:

Phil Mickelson gave a civics lesson after his play Sunday in the final round of the Humana Challenge. The lecture: I’m not going to pay more in taxes than I can take home to my wife and kids.

As a longtime California resident, Mickelson vented after shooting a final-round 66 for a 17-under 271 total and tie for 37th in his 2013 debut. Last fall, Californians approved Proposition 30, which boosts the state income tax to 13.3 percent on earnings of $1 million or more. That’s a 29.1 percent increase from the previous “millionaires tax” in a state with tremendous fiscal issues.

Compound that increased liability with the recent changes to the federal tax code, which bumps the top bracket to 39.6 percent from 35 percent to avoid going over the so-called fiscal cliff, and Mickelson’s tax hit is substantial.

Jeff Dunetz gets an A in dynamic tax analysis:

Some people vote at the ballot box, others vote with their feet.  As Mickelson implies–why work if you only get to keep 38% of your money?  Some people (who can afford it) will stop working, others may leave the country. But in the end, as usually happens higher tax rates (which the Democrats want to make even higher) lead to lower tax revenue.

Let’s put it this way.  Economic growth comes from the kind of dynamic policy that creates wealth rather than redistributes it in the assumption of a zero-sum game.  Tax policies created with static analysis in mind tend to produce stasis — or worse.

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But he probably will cut back on his schedule, playing only the tournaments he really wants to play, and move out of California.

Also, he will also probably cut back on endorsement contracts that require him to actually do something that takes a significant amount of time, especially ones that take him away from home.

Professional golfers at Mickelson’s level typically spend about two thirds, or more, of their year away from home, traveling either for tournament appearances or to fulfill endorsement contract obligations.

Who wants to have to travel a lot, taking you away from your wife and children, to keep only 38 cents of every dollar made, handing the rest over to people who demonize you for making that kind of money?

farsighted on January 22, 2013 at 8:56 AM

Gosh, how ever did the millionaires survive when they paid far more taxes than this crybaby a-hole millionaire?

Dave Rywall on January 22, 2013 at 9:01 AM

Of course, the lefties, socialists, and commies will be outraged that he wants to avoid paying 62 cents of every dollar he makes over $1 million to the government. How dare comrade Mickelson selfishly refuse to work as hard as he can to increase government revenues for the benefit of the people. He owes it to his fellow comrades to do what has been “asked” of him.

farsighted on January 22, 2013 at 8:25 AM

Needs to be repeated.

farsighted on January 22, 2013 at 9:06 AM

Gosh, how ever did the millionaires survive when they paid far more taxes than this crybaby a-hole millionaire?

Dave Rywall on January 22, 2013 at 9:01 AM

They utilized the tax shelters and loopholes that you libwits complain about so much.

gryphon202 on January 22, 2013 at 9:18 AM

They utilized the tax shelters and loopholes that you libwits complain about so much.

gryphon202 on January 22, 2013 at 9:18 AM

And let’s not forget the good that the tax shelters and loopholes achieved. We would be as poor as Brazil is now if we hadn’t given the wealthy incentives to produce.

thuja on January 22, 2013 at 9:26 AM

And let’s not forget the good that the tax shelters and loopholes achieved. We would be as poor as Brazil is now if we hadn’t given the wealthy incentives to produce.

thuja on January 22, 2013 at 9:26 AM

Personally, I’m for getting rid of the tax shelters and loopholes altogether and just lowering taxes across the board. If you want to give producers incentive to produce, nothing would do it quite like quitting this bullshit social engineering-by-tax code scheme.

gryphon202 on January 22, 2013 at 9:32 AM

given the wealthy incentives to produce.

thuja on January 22, 2013 at 9:26 AM
—-

ha ha ha tell us how many jobs Mickelson has created with his wealth

Dave Rywall on January 22, 2013 at 9:36 AM

Comrade Mickelson should be happy the government allowed him to become a millionaire and still keep as much of his earnings as it does.

How dare he be so ungrateful as to complain when “asked” to “contribute” just “a little more”. He still gets to keep 38% of every million he makes.

The ungrateful Mickelson should be content with what he is allowed to keep and happy to help his fellow comrades with the “contributions” and “sacrifices” his government has “asked” him to make for the benefit of his fellow comrades.

farsighted on January 22, 2013 at 9:36 AM

ha ha ha tell us how many jobs Mickelson has created with his wealth

Dave Rywall on January 22, 2013 at 9:36 AM

More than you have kvetching about him. I’m sure since he’s wealthy, you can imagine he must employ a caddy on the courses he plays. The courses he plays are almost universally country clubs, so those employees feel a keen benefit from Mickelson’s career. I could go on and on and on.

But anyhow, what do you care? Your stated intent isn’t to screw over golf players anyway. It’s to screw over “the wealthy,” which includes those who are wealthy and even more productive than professional athletes.

gryphon202 on January 22, 2013 at 9:40 AM

gryphon202 on January 22, 2013 at 9:40 AM

The selfish greedy ungrateful millionaire Mickelsons have heavily supported many charitable organizations with both their time and money, organizations that both employ people and help the less fortunate.

That’s not good enough, apparently. It would be so much better if they just handed that money over to federal and state governments, because governments that year after year borrow, spend, and print billions and trillions they do not have know best what to do with it.

farsighted on January 22, 2013 at 9:53 AM

if he voted democrat he needs to stay in Ca and suck it up

RonK on January 22, 2013 at 9:55 AM

ha ha ha tell us how many jobs Mickelson has created with his wealth

Dave Rywall on January 22, 2013 at 9:36 AM

C’mon. You’re not really that stupid are you?
Oh, wait…

NOMOBO on January 22, 2013 at 10:02 AM

He’s just voting with his feet – no mystery there.

The only way you can control this beast is to starve it.

ICanSeeNovFromMyHouse on January 22, 2013 at 10:06 AM

ha ha ha tell us how many jobs Mickelson has created with his wealth

Dave Rywall on January 22, 2013 at 9:36 AM

Have you looked into his foundation and other charities? He expends quite a bit of his wealth on others.

But so far as jobs, let’s use Obama’s formula on that, okay? Obama’s formula is that for every $115k spent a job is “saved or created”.

I’d say with his earnings and endorsements over $60M if he spent only 10% that would be $6M, accounting for 52 jobs “saved or created”. And I would say that $6M is rather conservative.

And of course this doesn’t count the good he does through his foundation and charities.

How many jobs did you save or create last year?

ButterflyDragon on January 22, 2013 at 10:22 AM

Have you looked into his foundation and other charities? He expends quite a bit of his wealth on others.

But so far as jobs, let’s use Obama’s formula on that, okay? Obama’s formula is that for every $115k spent a job is “saved or created”.

I’d say with his earnings and endorsements over $60M if he spent only 10% that would be $6M, accounting for 52 jobs “saved or created”. And I would say that $6M is rather conservative.

And of course this doesn’t count the good he does through his foundation and charities.

How many jobs did you save or create last year?

ButterflyDragon on January 22, 2013 at 10:22 AM

Also, Mickelson doesn’t bury what’s left over after legalized theft government confiscation taxes, voluntary charitable contributions, and spending in tin cans in his yard.

What is left of the the other $54 million is invested in enterprises that provide (AKA “save”) and create jobs, some of which Mickelson oversees, such as his golf course architecture and construction business. Also, when made wisely such investments create new wealth.

Libs, lefties, fascist socialists, commies, and envious hate filled class warfare warriors either do not understand this or do not care (or both) because they want the government to confiscate and spend/redistribute as much of other people’s wealth and income as possible, with themselves and/or whom they self-righteously deem deserving as the beneficiaries.

farsighted on January 22, 2013 at 11:08 AM

ha ha ha tell us how many jobs Mickelson has created with his wealth

Dave Rywall on January 22, 2013 at 9:36 AM

Typical liberal, an economic IQ of a 1st grader (that’s being generous).

Why don’t you ask all of the tour stops he plays ay how much he adds to the economy? Ask CBS, NBC, and The Golf Channel what economic impact he has on their business? Ask the foundations he help fund if their employees appreciate him?………

Tater Salad on January 22, 2013 at 11:28 AM

MONEY QUOTE:

“But if you add up, if you add up all the federal and you look at the disability and the unemployment and the Social Security and the state, my tax rate’s 62, 63 percent. So I’ve got to make some decisions on what I’m going to do,” said Mickelson.

A man’s gotta do what a man’s gotta do for his family. “Lefty” and I are “homies”, having both graduated from AssU (Arizona State, me more than once). Phil is not only a great ambassador for the “sport” (if you can call it that), but he’s also one helluva human being. Why would ANY decent man allow the State of California to imperil his family’s existence, long-term viability, and the immense amount of money Phil joyfully gives to charity? – Gov. ‘MOONBEAM’ Brown is going to finish off that sinkhole.
(assuming of course that an earthquake doesn’t take them all out to sea first)
~(Ä)~

Karl Magnus on January 22, 2013 at 11:48 AM

What I find lacking in all the reporting is the number of millionaires and billionaires, like Buffet, moving to california so they can pay higher taxes, as they’ve said they want to do.

Surely the 2% are flocking to CA now, right?

BobMbx on January 22, 2013 at 12:36 PM

O/T but totally KARMA! This is too funny.

JetBlast on January 22, 2013 at 12:49 PM

What I find lacking in all the reporting is the number of millionaires and billionaires, like Buffet, moving to california so they can pay higher taxes, as they’ve said they want to do.

Surely the 2% are flocking to CA now, right?

No. California is in an ethereal elevated level of political “enlightenment” already. Better the 2%, such as Buffett, remain in or re-locate to deep red states so as to re-educate the populace and influence political policy toward that state of “enlightenment” California and other blue states already enjoy.

hawkeye54 on January 22, 2013 at 12:57 PM

Mickelson likely has his wealth invested. THAT is where jobs will eventually come from. He does not have to create a single job personally when his investments (if configured more for return as opposed to avoiding taxes) will do it. The idea that he has to create jobs if he keeps his income is a form of the “trickle down” theory that liberals like to bash.

What Mickelson has done is to review the tradeoffs between his vocation (golfing) and the costs of his vocation (travel, time away from family, some degree of uncertainty, etc.) and decided that if his taxes take about 62% of his income then perhaps his “work” may not be worth it. He will then make choices appropriate to his view of the tradeoffs. This is especially true when individual effort plays a significant part in how much income one gets.

That is what happens with changing tax rates. People’s decision point on the tradeoffs change and they react accordingly.

Russ808 on January 22, 2013 at 4:00 PM

Two words: Laffer Curve

NoPain on January 22, 2013 at 4:11 PM

ha ha ha tell us how many jobs Mickelson has created with his wealth

Dave Rywall on January 22, 2013 at 9:36 AM

What you libtards fail to realize, is that unless he sticks that money under his mattress, he creates jobs with it. If all he does it put in the bank, the bank can loan ten times that to help small businesses and individuals grow the economy. If he buys a car, he helps an auto assembly line stay open. If he renovates his house, he helps a construction company grow. If he takes a vacation, he helps the economy wherever he goes.

Clinton pushed through a luxury tax. The rich bought less boats and expensive cars. Shipyards and auto plants laid off workers. The rich kept their money. Just like California will lose not only the taxes they thought they were going to get, but the boost to the economy Phil spending his money there would have provided. It will impact all the area businesses where he would normally spend his money, further depressing the tax revenues. That 38% would have been spent on stuff with California’s high sales tax.

And how many jobs would that tax money have created? None. It would only close the deficit. Maybe save some jobs on the overstuffed “teams” in government offices. That’s it.

PastorJon on January 22, 2013 at 7:21 PM

Which do you think is the more realistic assumption, and not just for Mickelson but for the rest of the well-resourced high-end earners looking for ways to minimize the bite on their checks? Oh, let’s not always see the same hands …

Bad question. Neither option is correct. The correct answer is that, assuming Michelson manages to make the cut in a few California based golf tournaments, California will get less of Michelson’s money.

California will tax whatever winnings Michelson earns from events such as Torry Pines this week. He only gets paid if he makes the cut. So, California’s collective take from Michelson and the rest of the field in California tourneys is pretty much constant.

Once he moves, that’s all they get. Winnings from other tourneys will be taxed in those states if they have an income tax or in his home state if they have one. If he moves to Florida, Tennessee, Texas, North Carolina or any other place that has no income tax, he only pays state income tax on his net earnings generated in the states where the tourneys took place.

If his new home state has no income tax, he pays no tax on his personal big money makers, his endorsement contracts and presumably his investments of previous winnings.

Obama says to Michelson, “You didn’t win that,” as he grabs for more money. Move off shore to a country with a low or no income tax rate and it’s all his, except for the US share of his actual winnings on tour in the US. Brittish open? Not subject to US tax if not a US resident.

Worse news. Michelson has only one employee — his caddy. He keeps his job, but if he moves, he skates too. But small businesses? When their owners shut down because they have everything they need, not only do they lose the taxes on the business’ income, they lose the taxes on the employees’ income, too. If they move the business off shore and move themselves, too, they still skate on US taxes and the jobs not kept by folks who move with the company will be filled by employees in the new location, probably at far lower wage costs to the company. The tax savings in the first year could be enough to finance the move.

EconomicNeocon on January 23, 2013 at 6:18 PM

I don’t know why the press can’t get this right, but the top income tax rate in California is actually 14.63%.

http://www.edd.ca.gov/pdf_pub_ctr/de4.pdf

Heywood U. Reedmore on January 23, 2013 at 10:37 PM

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