Income Tax-Free States' Abnormal Success in the NBA
While it's obvious that teams can be successful with a high state income tax (Los Angeles Lakers being the obvious example), there are some interesting trends that would suggest that no state income tax teams perform better than high state income tax teams.
There are three income tax-free states with teams in the NBA (Texas, Florida and Tennessee), compiling for six teams. The three highest income tax-states in the US are New Jersey, New York, and California and there happen to be six teams in the NBA from these three states also.
Comparing these twelve teams’ success this past season can lead to interesting discoveries.
- Most notably, with the exception of the Los Angeles Lakers, all 6 of the tax-free states finished with a better regular season record than the 5 remaining high tax state teams.
- Five of the six tax-free teams made the playoffs, with Houston being the first team in the Western Conference not to make it.
- Three California teams (Sacramento, Golden State and LA Clippers) comprised for 3 of the 4 worst records in the Western Conference.
- New Jersey had the 3rd worst record in the Eastern Conference.
Historically, success has been disproportionately achieved by tax-free teams in the NBA. Going back 20 years, which includes the dominant Michael Jordan Bulls and Kobe-Shaq Lakers’ dynasties, here are some facts:
- Tax-free states accounted for 40% of the previous championships, even though they comprised for 15% of the league during that time frame (Grizzlies moved to Memphis in 2001).
- The only high income tax state team to win a championship has been the Lakers.
- Depending on the outcome of this year's Finals, at least three teams from tax free states, maybe four, will have won an NBA title.
- All five of the the NBA teams from Texas and Florida have made the Finals on more than one occasion in the last 20 years.
Like I said, the highly taxed Los Angeles Lakers have won the NBA title in 5 of the last 11 years so I’m not proposing that high taxes prevent a team from being successful. But on an aggregate level, there appears to be a definite correlation that state income tax-free teams have attracted better players than high tax states. And if NBA players’ decisions are impacted by tax rates, you can be certain that wealthy executives, business owners, and hard working American families will also take their talent, money, and jobs with them to tax-advantageous states.