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What LeBron James And A-Rod Teach Us About Public Policy

Here at the Pundit, we don’t have too many occasions to write about sports. In some of the work we do for The Weekly Standard, however, we have found a few such opportunities.

Last year, for example, we wrote, LeBron James Brings the High Cost of Bad Policy to the Fore, which was a piece that played off the superstar’s decision to move to low-tax Florida to illustrate how public policy influences where economic activity winds up occurring. We noted a connection between the way taxes influence where activity occurs and public policy issues related to food deserts:

Those who want to see better public policy in America owe a high five to LeBron James.

His highly publicized decision to sign with the Miami Heat brought forth a torrent of articles noting that the star basketball player stood to save a lot on state and local taxes by moving to Florida. Although conservative media noted the incentive early, eventually it hit the New York Times and other mainstream media outlets. It was a great teaching moment, in which the costs of a public policy — in this case high state and local taxes — could be clearly seen.

The interesting thing is that taxes — and broader public policy actions — affect such decisions every day.

If LeBron James were an auto plant, considering re-locating to Cleveland, New York City or Miami, it is very obvious that the higher taxes in Ohio and New York wouldn’t matter at all, at least not directly. Why? Because the governments in New York and Ohio would offer all kinds of “incentives” to equalize the tax burden with Florida and maybe even undercut Florida’s level of taxation.

But LeBron James is a high-profile, high-earning individual and, so far at least, the government has no way of aiming legal exceptions at one individual.

…Here’s another example of where the LeBron James debate might actually further a substantive policy difference: First Lady Michelle Obama proudly announced a $400 million initiative to help the 23.5 million people she claims live in “food deserts” — defined as anyone who lives more than a mile from a supermarket.

The first lady’s proposal, announced in the heart of Philadelphia, among other things, aims to help inner city residents gain access to large grocery stores with lots of fresh foods (rather than the local mom and pop shops or more distant supermarkets, they currently frequent to purchase groceries). But, no matter Michelle Obama’s intentions, her proposal misses the root problem. Why directly subsidize individual stores to open in these areas closer to these 23.5 million people? Why not address the public policy problems that cause retailers to stay away?

The retail sector is highly competitive and, generally, many players compete vigorously for the opportunity to open retail food stores. Why, then, should it be necessary to give grants or loan guarantees to get retailers to open in underserved areas? In the inner city the issues involve things such as the inability of the local police to assure safety for patrons and staff plus keep shop lifting to national averages. Those retailers — such as Pathmark — that have made commitments and opened large supermarkets in inner cities have often felt the need to hire uniformed police officers to man the store 24/7. Between vacations, training, holidays and sick days, it can take five or more full time police offers to guard the store. In a unionized police force, take New York City for instance, salary and benefits to man that force can cost over half a million dollars a year.

Just recently, we wrote a piece titled, Lightning Rod: It’s Not A-Rod’s Fault He Got a Tax Break on his Condo, which looked at the contretemps over A-Rod’s new condo and how it will be taxed to point out three principles that should inform public policy:

  1. Government-offered incentives and exceptions enable bad public policies.
  2. So-called “tax expenditures” and other off-budget expenditures need to be moved on budget so they can be properly tallied as part of the cost of government.
  3. Taxes need to be explicit so that the general public doesn’t draw incorrect conclusion about who is paying taxes and who is not.

Of course, we are not really writing about sports. We are using star athletes to illustrate broader points about public policy choices. It is our attempt, in these challenging times, to weigh in and try to help nudge public debate in a productive direction.

We have many organizations in the industry that lobby for government policies beneficial to the industry. Yet, in the long run, the prosperity of industry participants depends at least as much on generally effective public policy influences where economic activity winds up occurring.

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