the official blog of the evergreen freedom foundation

LeBron James, Sen. John Kerry and the late Judge Learned Hand - three of a kind?

Posted by Scott "The Piper" St. Clair - July 24, 2010

The late Judge Learned Hand, the greatest American jurist ever screwed out of a seat on the U.S. Supreme Court, wrote in 1935:
"Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister
in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands." Gregory v. Helvering 69 F. 2d 809
There is no patriotic duty to pay high taxes or more than you are legally required to pay. And if you can legitimately adjust your affairs to reduce your overall tax liability, you have the legal right to do so. Seems pretty clear.
 
But now everybody and his mother are dumping on two noted Americans who have done just that. It's as if they have some heretofore unknown duty to do what others want in order to pay more taxes.
 
Sen. John Kerry owns a boat, but it's not just any boat: it's a 76-foot New Zealand-built Friendship sloop with an Edwardian-style, glossy varnished teak interior, two VIP main cabins and a pilothouse fitted with a wet bar and cold wine storage. The yacht was designed by noted Rhode Island designer Ted Fontaine..
 
Sen. Kerry is a Democrat from Massachusetts. But the yacht is berthed in Rhode Island. And this is because...? How about the fact that Rhode Island doesn't tax boats, but Massachusetts does. The Bay State levies a 6.5 percent sales tax and annual excise tax on yachts, which means that the Isabel (pictured below right), the name with which Kerry christened his new toy, would have cost him $437,000 in sales tax and about $70,000 in annual excise taxes on the the yacht. Reports say that it sold for something close to $7 million.
 
The non-U.S.-built issue aside, since the yacht was purchased from a Rhode Island firm, designed by a Rhode Island resident and berthed in Rhode Island, then Massachusetts can't touch it.
 
LeBron James is the biggest name in basketball. Not since the legendary Michael Jordan has a player so dominated the game. Recently the free-agent James signed a contract with the Miami Heat, choosing them over the New York Knicks, who were salivating over him, and his now-former team the Cleveland Cavaliers.
 
The sports world was shocked: why would James go to smaller-market Miami rather than the Big Apple. Aside from the fact that Pat Riley coaches the Heat and has a winning record, tax analysts discerned a real reason. Consider:
"In addition to the basketball reasons for signing with the Heat, James is going to walk away from this deal with less money in his contract but more money in his pocket. This is because Florida offers a number of tax advantages over New York -- a fact that hasn't gone unnoticed in the tax world.

Assuming that James took just under $17 million from the Heat (which is probably pretty close to accurate), he would pay no state income tax, leaving him with the same $17 million. If he had gone to New York, even if he nabbed an additional $1.5 million (as the salary difference has been speculated), he would shell out close to $1.7 million in New York state taxes. That doesn't count James' endorsements with companies like Nike, Sprint and McDonald's. Those deals are said to bring in $40 million per year for James, landing him at #19 on the Forbes list of the 100 most powerful celebrities of 2009 (just behind his idol, Michael Jordan).

The total bill? Over five years, that means James could save more than $25 million in state taxes alone by relocating to Miami over New York. And that doesn't count other taxes such as local taxes (New York has a bunch) or property taxes (on average, New Yorkers pay a bigger percentage of their income for property taxes than Floridians). In fact, overall, Florida has a fairly attractive tax picture. Compared to other states, it is ranked by the Tax Foundation as 47th in terms of state and local tax burdens; New York, on the other hand, is 2nd (just behind New Jersey, the home of the Nets, also desperate to sign James).

Is the lure of lower taxes enough to have convinced James to make the switch? Not on its own: James is too smart for that. But you can bet it figured into the equation. He would not be the first mega-star lured down to Florida for tax reasons. Prior to his legal and marital woes, Tiger Woods was said to have relocated from California to Florida primarily in order to save on taxes."
Less on the gross, but more on the net - welcome to the world of business.
 
To all those who are complaining about Sen. Kerry's boat-docking scheme or LeBron going to the Heat (especially all you Knicks fans out there), consider that all both of them did is follow Judge Hand's dictum: "Nobody owes any public duty to pay more than the law demands."
 
In fact, there is a legitimate school of thought that holds that the good senator and James did the moral thing since paying more in taxes than you have to only serves the encourage the government to engage in hanky panky.
 
If you want to get mad at someone, try the state legislature, but in this instance leave Sen. Kerry and LeBron alone to follow the guidance of their tax guru, Judge Learned Hand.
 
The Piper 

Thoughts?   Add Comment -

Fragrance Girl said on Jul 24 2010 at 7:46pm
Sooooo NJ, my home state, is #1 in state and local tax burdens...I'm not at all surprised...it is astronomically expensive to live here. Property taxes outrageous, and sales taxes only slightly lower than NYC.

Just today I learned, working with a real estate broker, that the Essex County assessed value of my home property (for which property taxes are calculated) may prove upward of 20% higher than determined market value, or final listing price. Interim to final sale of my home, if the market value is lower than the assessed value, you can bet I'll petition for an adjustment and attempt to retrieve a portion of the property taxes I've been over charged.

Ten years ago my NJ property taxes were $12.0 annually, today they are $18.0. And if that doesn't blow your mind, 10 years ago when I relocated from Atlanta, the home property I left on a larger 3/4 acre lot was taxed annually at $3.0 in comparison!

So as much as I despise John Kerry, I heartily support his RI tax shelter on the yacht. And no wonder Florida is the retirement capital of the East Coast.

Great article Piper.

Amy Ridenour said on Jul 24 2010 at 8:35pm
I believe the fuss over Kerry's decision relates to the fact that he supports higher taxes. To support a thing except when it applies to oneself is going to draw comment, especially by those who pay higher taxes today because of John Kerry's career choices.

Yes, it is legal, and Judge Hand was right. But Judge Hand also would have said the public has the right to mock a man who tells others to pay more taxes, while trying to pay less himself.

my name is Ben said on Jul 27 2010 at 12:34am
Scott

I'm curious if you dd a detailed analysis of the marketing advantages Mr James would have in playing in NY over Miami and how that would offset any tax liability?

I also wonder if you know the vacancy rate of boat slips on Massachusetts versus rhode island? Friends of mine who own boats tell me it's not easy getting into a marina and especially a choice marina that I would guess Mr Kerry desires?

John Chittick said on Jul 27 2010 at 11:38am
I'm pretty sure that Senator Kerry favors the lapse of theft relief commonly called the Bush Tax cuts under the PC rationalization, "paying their fair share". Is he not just another well to do, hypocritical, ruling class poseur avoiding paying "his fair share" of progressive theft. Its one thing to avoid tax by voting with your feet, or in his case, sails, but it reeks of insincerity when one embodies the essence of and is totally empowered by the progressive politics of resentment, hatred and envy at the same time. Ayn Rand's novels were criticized when first published for having surreal characters, particularly the villains. She has been vindicated many times over by Senator Kerry and his ilk.

John Chittick said on Jul 27 2010 at 4:21pm
According to Fox News, Senator Kerry has agreed to bring his sail boat back to Massachusetts and will pay all applicable taxes. Whether he is doing so to be consistent or because he was caught appearing hypocritical is anyone’s guess.