Punitive tax policy had kept the world's fastest man from competing in [the U.K.] for the past three years. Explaining Mr. Bolt's decision to skip a 2010 race in London, his agent told reporters: "He will earn a lot less by competing in Britain if he maintains his current endorsement level." Mr. Bolt competed in Paris that August instead.
Few high earners in other fields would choose France over Britain on tax policy, but athletes are a different story. [...] [N]ormally Britain takes a cut of an athlete's worldwide endorsement earnings—that means overseas sponsors in addition to those in the U.K.—proportional to the time spent in Britain.
I was steered to this Wall Street Journal item by Economist John Spry and frequent Twitter sparring partner Craig Westover.
Bolt ran six official races in 2011, including the IAAF World Championships. Had one of those events been held in the U.K., his fees for the race would have been subject to the income tax—as well as one-sixth of his world-wide endorsement income.
One source estimates Bolt's current year income totals $20.3 million, which means $3.83 million of his income would be taxed if he ran in London instead of say, Oslo.
(In the U.S., professional athletes pay income taxes in the states where they perform, as a pro-rated percentage of their salaries, but they don't pay state taxes on their endorsements.)
The article also quotes No. 1 tennis player Rafael Nadal, who makes an estimated $33 million, as skipping a Wimbeldon warm-up event because he was "losing money" by playing in the U.K.
Although making less is not quite the same as losing money, no one would blame Nadal or Bolt for exercising their right to pick where they compete and avoid the tax.
Seen another way, each event Bolt runs does contribute to his worth as an endorser. If he ran no races at all, his value would decline, as it does for all athletes, even self-declared legends.
But is it fair to say Bolt "earned" part of his endorsements in a particular race?
Perhaps. But his sponsors determine what they think his name is worth independently of a specific performance. I personally don't think one-sixth of his endorsement income is attributable to one of six races.
As tax policy, the U.K. law seems extreme, doesn't it? And the example certainly underscores the article's conclusion, "that taxes influence behavior."
Less obvious, though, is the second part of the conclusion, that "punitive taxation hurts everyone."
Bolt skipping a London race deprives maybe 50,000 spectators of less than ten seconds of live ecstacy, since Bolt races only in a few countries each year anyway. The lost "economic benefit" of him performing in London is also dubious, since sports fans will still spend their discretionary dollars at soccer matches, in pubs or other entertainments.
No one needs to change the tax code to help out Mr. Bolt who, excluding his training time, will run for about three minutes a year to earn his $20 million. He's perfectly capable of avoiding the unfairness.
But by publicizing such exceptional circumstances, the low-to-no-tax advocates seek to spread the sense of unfairness to the rest of us, thereby reducing support for any taxation schemes—but especially those that tax the wealthy.
Wherever you look, the call for smaller government and lower taxes benefits most the people who have the most and have the most power to evade taxes already.
