I don’t particularly like soccer and I’m not normally a fan of the research of Professor Emannuel Saez, so it is rather surprising that I like Professor Saez’s new research on taxes and soccer.
While Saez may have a reputation for doing work that often is used by advocates of class warfare, his latest research is classic, supply-side economics. He and his co-authors studied soccer players and found that they are very sensitive to marginal tax rates.
They even confirmed that the Laffer Curve is sometimes so strong that governments can collect more revenue by reducing tax rates on the rich. Krugman won’t be happy about this.
Here are some segments from a story about the research in the Christian Science Monitor.
…on one subject, Europe’s soccer stars have an important message for Americans:
It turns out that highly paid soccer players are sensitive to taxes. They tend to move to those nations that give them a break. Why is Spain’s top league a sudden soccer powerhouse? One reason is tax policy. Why are Denmark and Belgium’s leagues stronger than in other similar countries? Ditto.
In perhaps the first study to provide compelling evidence of a link between tax rates and worker migration, three economists look at this highly paid, highly mobile workforce and make several surprising conclusions:
1) Top marginal tax rates matter to big earners.
2) If you’re going to cut taxes to lure such highly skilled workers, make it a big tax cut. Otherwise, it won’t have much effect.
…Professor Saez and his colleagues found something striking: The leagues in low-tax nations attracted better players and had better teams.
The effect was also pronounced in individual nations that reformed their taxes. For example, Spain in 2004 introduced a new flat rate of 24 percent for foreign soccer players, nearly half the top marginal rate it charged its residents. After that law – called the “Beckham law” because British star David Beckham took advantage of it – Spain saw its share of foreign players increase while the foreign talent in nearby Italy shrank. Tax cuts for foreign players in Denmark and Belgium had similar effects.