The Houston Rockets, which recently acquired ex-Oklahoma City Thunder star James Harden in a trade, had more to offer Harden than extended time on the court or even a five-year, $80-million contract extension.
Just as LeBron James benefited when he moved from high-income-tax Cleveland to no-income-tax Miami, so Harden now benefits. For every game he plays in Texas, Harden doesn’t have to pay a penny of income tax.
By contrast, if he still lived in Oklahoma, the Beard—who easily qualifies for the top tax bracket—would be subject to an income tax of 5.25 percent on income earned at any home game. That means, had Harden signed a comparable contract extension with the Thunder, he’d have paid at least a couple million dollars in income taxes to the state of Oklahoma.
Don’t think the Rockets aren’t aware of this. As Sports Illustrated writer Chris Ballard recently reported, “A hardbound book the Rockets produce for potential free agents has a page that reads, ‘FOUR WORDS TELL YOU EVERYTHING: ZERO. DONUT HOLE. NADA. ZILCH. NOTHING. NO STATE INCOME TAX.’ The accompanying graphics show exactly how many more new Aston Martin Virages, Sony 60-inch LED TVs, and Franck Miller Conquistador watches a player can buy with the tax savings.”
The city of Houston no doubt will also benefit from the increased revenue Harden brings in for the Rockets—not only in increased ticket sales, but also in increased merchandise sales. No longer can OKC shops sell “Fear the Beard” T-shirts and the state collect sales tax on the exchange.
To be sure, Harden didn’t choose to move to Houston in the same way that LeBron James chose to move to Miami—so it’s not possible to say the trade or Harden’s move to Houston was in any way driven by tax considerations, but there’s still a lesson in all of this.
Mike Brownfield put it well in a blog post for the Heritage Foundation when LeBron James left Cleveland: “Talent is valuable to the economy, and high taxes can have an impact on where talented people choose to live and work.”
Dzurisin is OCPA’s policy impact director.
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