Scoring with Low Taxes
Kevin Hassett pointed out an interesting finding (not online) in the June 20 National Review:
At issue is the “Beckham law” that was enacted on June 10, 2005. Spain, in an effort to lure high-priced athletes, artists, and executives, passed a law that allowed these individuals to reside in Spain and pay a low flat tax of just 24 percent. Soccer star David Beckham was one of the first to take advantage of the law, hence its name. …
A new study published by the National Bureau of Economic Research suggests that the link between taxes and soccer performance is more than just a coincidence. Economists Henrik Kleven, Camille Landais, and Emmanuel Saez gathered data on club performance in the top leagues of 14 European countries going back to 1980, and explored the extent top which changes in tax rates explain player mobility, and the extent to which player mobility explained performance.
They found that countries that allow professional soccer players to keep more of their pay do better. More local stars stay, and more foreign stars immigrate.
As any sports fan might observe, the effect is diluted when the field is narrower — say with World Cup teams or American professional clubs. Part of the reason for the correlation of low taxes and good soccer players is that teams in higher-tax areas have to pay more in salary to be competitive as employers, which leaves less money to pay players farther down the lists.