The late U.S. Senator Howard Metzenbaum (D) and basketball star LeBron James are both well known names in Ohio, and they have an important message for the nation on tax policy. Metzenbaum served on Capitol Hill from 1974 until 1994, and died at the age of 90 in 2008.
The Columbus Dispatch called him “a poster child for liberals.” He had a perfect 100% score from Americans for Democratic Action, and Eleanor Clift of Newsweek said he was the “liberal conscience of the U.S. Senate.”
Metzenbaum was a firm foe of corporations and deregulation. He often denounced what he called “the radical right”, and future Supreme Court Justice Clarence Thomas told him: “God is my judge, Mr. Metzenbaum, not you.”
Metzenbaum always advocated higher taxes. Over and over again he said wealthy people and corporations should pay more. The Senator was well acquainted with the tax code because he began his career by charging $1 for every return he prepared.
He was a co-founder of the Avis car rental company and became a multi-millionaire. The late Senator wanted other wealthy people to “do their part” by paying high taxes, but he certainly had no interest in doing that himself.
Ohio gave him three decades in elective office, and in taxes he gave the state the shaft. Metzenbaum left both the Senate and Ohio. He moved to Florida which has no income, estate or municipal taxes. The ban on the personal income tax is a part of Florida’s Constitution.
By declaring Fort Lauderdale as his personal residence, Metzenbaum saved millions. This was especially true in estate taxes. Ohio has the lowest asset threshold in the country, $338,333, which was well below Metzenbaum’s net worth.
The Senator is back in the news today because of Ohio’s NBA superstar free agent LeBron James, who is leaving the Cleveland Cavaliers. James is moving to the Miami Heat, and Florida’s lack of an income tax will be an enormous benefit to him.
His fans back home in Ohio are not only sad, but Robert Schoenberger and Teresa Dixon Murray of the Cleveland Plain-Dealer estimate the city will lose $48 million every NBA season without James.
Many teams wanted LeBron James. As he contemplated offers of a five year $96 million contract, he must have considered the impact of state and local taxes:
$12.34 million: New York Knicks
$10.32 million: New Jersey Nets
$5.69 million: -Cleveland Cavaliers
$2.85 million: -Chicago Bulls
$0: ———-Miami Heat
His endorsement income is expected to be even greater than his salary, and in Florida it will also be tax free. In his early days on the Chicago Bulls, Michael Jordan declined his $3.5 million salary so they could build a championship team.
He was able to do this because of the $37 million he was receiving in endorsements. The Wall Street Journal made separate observations about Metzenbaum and James, but they should be combined:
Howard Metzenbaum thus denied the state in which he lived most of his life a parting financial gift. But he has at least provided the rest of us with a teaching moment in tax policy. If a liberal lion like Metzenbaum is willing to relocate to avoid his state’s death tax, maybe living politicians in Ohio will better understand how their confiscatory tax laws are driving its citizens to warmer climes. . .
While LeBron’s departure got extraordinary media attention, it is hardly unique. In the early 1990s, Ohio was the home of 43 Fortune 500 companies. Twenty years later the number is 24.
Census Bureau data show that from 2004-2008 Ohio saw a net outmigration of $6 billion of income and some 97,000 taxpayers. We feel for Cleveland fans, but maybe they should allocate some of their wrath to the state politicians who keep driving high-income individuals and their businesses to financially sunnier climes.
Similar sentiments were reflected in the New York Post:
If LeBron James goes to the Miami Heat instead of the [New York] Knicks, blame our dysfunctional lawmakers in Albany, who have saddled top-earning New Yorkers with the highest state and city income taxes in the nation, soon to be 12.85 percent on top of the IRS bite. On a five-year contract worth $96 million — what he’d get from the Knicks or the Heat — LeBron would pay $12.34 million in New York taxes.
The Message From Howard Metzenbaum and LeBron James
It is not surprising Howard Metzenbaum and LeBron James did not want to pay high taxes. They are similar to many of our most successful people and corporations. Senator Metzenbaum was wise regarding his family finances but he advocated disastrous policies for the nation. Liberals are foolish to believe raising taxes will not change people’s behavior.
High taxes kill economic growth, they result in fewer businesses and jobs, and they bring in fewer tax dollar. If you don’t believe me then look at California, New York, New Jersey and Illinois.
They all have huge financial problems and they also have some of the highest personal income tax rates in the nation. This was a major campaign theme for New Jersey’s new Governor, Chris Christie (R). He says soaking the rich is always a politically popular move, but his state found out wealthy residents have other options.
Many individuals and companies have relocated to low tax areas and they have brought their buying power with them. If taxes are not kept at reasonable levels, wealthy citizens will act exactly like Howard Metzenbaum and LeBron James.