Do National Basketball Association players need higher salaries to play in high tax states? Evidence from free agents

ABSTRACT

This article investigates the impact of taxes on the salaries received by National Basketball Association free agents from 2010 to 2014. High state income tax rates affect the after-tax income received by players from their team as well as on any ancillary income. Using data on 576 free agents, we find statistically significant evidence that free agents signing in high tax states receive higher salaries, ceteris paribus. Our results suggest that a one-unit increase in the Average Tax Rate experienced by a free agent in a state leads to free agent salaries being over $60,000 higher.

KEYWORDS:

• Tiebout
• taxation
• National Basketball Association

JEL CLASSIFICATION:

• H20
• H24
• H70

Disclosure statement

No potential conflict of interest was reported by the authors.