Tax rates and professional athletes

The impact of income tax rates on work effort and the location of work continue to be debated and investigated. We have some new insights based on professional athletes. What do they suggest? N.C. University economist Mike Walden responds.

“I think this is some fascinating research, and it’s based on looking at the movement of professional soccer players in Europe.

“Now, the reason this has been used is, of course, that soccer’s big in Europe. There are international leagues that cut across countries, and players choose teams and move between teams in different countries.

“Now, in Europe, tax rates vary just like they do between states in the U.S. So what a couple of economists were able to do is try to assess the impact of varying tax rates in countries in Europe on the location of professional soccer players and to see if those tax rates seem to have any impact on what teams the players chose.

“And their conclusion is the tax rates did impact player movement. If you’re able to control for everything else that affects where a player might go, like the winning percentage of the team, what the researchers found is that players are less likely to go to countries; that is, less likely to play for teams in countries that have higher tax rates; more likely to go to play for teams in countries that have lower income tax rates.

“Now I should say that in terms of ranking the factors that determine where a player might play in Europe, tax rates were not at the top. They were down near the middle of the bottom, but still they did seem to have an impact on that player’s decision.”