An American Tale
Today, with a socialist juggernaut loose on the land, here’s a story that I am afraid will soon become as all-American as baseball itself.
Even casual sport fans by now know that 26-year-old right fielder Bryce Harper just signed a record busting 13-year, $330 million contract with the Philadelphia Phillies.
We’ve liked Harper ever since he replied, “That’s a clown question, bro,” to some reporter.
But it is the economics at work in Harper’s story that interests us as champions of prosperity and sound money. It is reported that the San Francisco Giants were in the hunt for Harper, too, and were willing to pay an astronomical amount to get him.
But they were undone by California’s sky-high taxes. The Giants would have had to pay far more than the Phillies for Harper’s after-tax income to be the same. So he went to Philadelphia instead of San Francisco.
Not only did he escape taxifornia by not signing with LA or SF— but he also chose the Phils, who are one of only 8 “Flat Tax” states in the country. That means whether you make $5,000 a year or, [cough], $27,538,462, you pay the same flat tax rate.
If he were to have played in California, he would have paid California state tax of $3,675,141. His total tax of his salary would have been 51.1%.
In Philly, where he will homer his way into the Hall of Fame, he will also save some cheddar- “enjoying” a lower tax rate of 41.8%, because the state of Pennsylvania only rakes $921,000.
That is $2,754,141 savings per year. Over the duration of his 13 seasons, (if he were to stay the duration of the contract, and the tax code didn’t change) that would be an insane $35,803,833 savings!!!!!!!
Harper’s story is only a large-scale example of calculations that are being made by people at lesser pay grades. We are seeing a lot of this sort of thing. Because it is hostile to wealth, the wealthy and even the not-so-wealthy are fleeing California in big numbers for tax reasons.
Charlie Munger of Berkshire Hathaway pointed out recently that places like California along with Connecticut, and New York City are shooting themselves in the foot with their tax greed.
“It’s been serious. Driving the rich people out is pretty dumb if you’re a state or a city,” said Munger.
It’s not just tax socialism that drives away wealth. Central banking itself and fiat money are nothing but monetary socialism. And you can see a corollary of tax greed in the US dollar.
In the words of Jim Grant, “the central bank is playing with fire by actively seeking to depreciate the dollar, a currency that, whatever its current lofty status in the world, is a piece of paper of no defined value.”
As we’ve pointed out often in this space, a building US debt calamity and Fed mismanagement are driving foreign central banks away from King Dollar.
And where are they going?
They are going to gold.
They’re buying billions of dollars’ worth of gold.
This flight to safety by foreign states illustrates one thing clearly. Governments around the world may be quite happy to fleece their citizens with their own bogus paper money schemes.
They just don’t want to be fleeced by ours. Just like Bryce Harper didn’t want to be fleeced by California.
You shouldn’t allow yourself to be fleeced either.