Thursday, July 15, 2010

Bolting away from the tax man

With two of my biggest interests being the sport of Track and Field and politics, the following post is a dream-come-true for me to write.

In the simplistic world of your typical statist, the theory of taxation is easy: The more government taxes us, the more government gets.

In reality, however, the act of taxation can affect people's behavior in ways that tax rates that are too high can actually lead to a decline in the amount of tax revenue coming in to government's coffers. Economist Arthur Laffer made this all too clear with his famous Laffer Curve, which statists, in their smug ignorance, continue to mock.

A real-world example of this concept comes to us from Jamaican 100 meter world record holder Usain Bolt on one side, and the kleptocratic government of Great Britain on the other.

British politicians got the hare-brained idea that they should tax the hell out of foreign athletes competing on British soil. Any money won in competition is to be taxed at a rate of 50%. If that is not bad enough, the tax law also demands a significant cut of any sponsorship income.

British sports organizers want to organize a head-to-head competition between Usain Bolt, and other world-class sprinters, including Tyson Gay of the United States, and fellow Jamaican, Asafa Powell. Will the competition happen? If it does, it will most likely not include Usain Bolt, and I can't say I blame him. I will let an article from the London Telegraph explain the rest:
Unless the tax rules are relaxed, athletics administrators fear British fans will be denied the chance to see the sport's biggest star in action again until he returns to the capital in two years' time to defend his Olympic titles.

"I wouldn't be optimistic about seeing Bolt compete on British soil this year and there is a strong chance he won't be back until 2012," said an insider close to the negotiations with the Jamaican.
In just this one small example, think of how much revenue the British government will lose as a result of Usain Bolt not competing, whereas if he was taxed at a smaller rate, the revenue would be something, rather than nothing. Again, this is just one man we are talking about. The article goes on to say that this confiscatory tax is pushing away athletes in other sports such as golf and tennis.

Remember Chief Justice John Marshall's famous words: "The power to tax is the power to destroy." This is a lesson that needs to be learned on both sides of the Pond.

"If a nation expects to be ignorant and free... it expects what never was, and never will be." -Thomas Jefferson


Darren said...

I was surprised that many US states do this with athletes--actually, with anyone (say, a businessman) who makes a little money in the state.

Truly foul.

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