Houston has been good for James Harden -- and not just because he sees more time on the court

November 28, 2012

Today, former Oklahoma City Thunder sixth man James Harden will return to OKC to challenge his former teammates in what is sure to be an emotionally charged match-up.

The game marks the first contest between the Thunder and the Houston Rockets since the Thunder traded Harden to the Rockets, along with a few of his Thunder teammates, for guards Kevin Martin and Jeremy Lamb, along with two first-round draft picks and a second-round pick.

So far, the trade has proved advantageous for the players involved. The Thunder are hitting their stride and challenging for the lead in the Western conference, while last year's Sixth Man of the Year has flourished in Houston, attempting more field goals than ever and averaging an impressive 25.2 points a game. His start was particularly eye-popping -- 82 points in two games with shooting percentages of 63.6 from the field, 42.9 from the three-point line and 87 from the free-throw line.

The Texas team had more to offer Harden than extended time on the court or even a five-year, $80-million contract extension, though. Just as LeBron James benefited when he moved from high-income-tax Cleveland to no-income-tax Miami, so Harden now benefits. For every game he plays in Texas, Harden doesn't have to pay a penny of income tax.

By contrast, if he still lived in Oklahoma, the Beard -- who easily qualifies for the top tax bracket -- would be subject to an income tax of 5.25 percent on income earned at any home game. That means, had Harden signed a comparable contract extension with the Thunder, he'd have paid at least a couple million dollars in income taxes to the state of Oklahoma.

The city of Houston no doubt will also benefit from the increased revenue Harden brings in for the Rockets -- not only in increased ticket sales, but also in increased merchandise sales. No longer can OKC shops sell "Fear the Beard" T-shirts and the state collect sales tax on the exchange.

To be sure, Harden didn't choose to move to Houston in the same way that LeBron James chose to move to Miami -- so it's not possible to say the trade or Harden's move to Houston was in any way driven by tax considerations, but there's still a lesson in all of this.

Mike Brownfield put it well in a blog post for the Heritage Foundation when LeBron James left Cleveland:

Talent is valuable to the economy, and high taxes can have an impact on where talented people choose to live and work. ...

The LeBron James lesson is one that states and local governments ought to learn — high taxes can drive out talent, leading to a loss in business (and tax revenue). But the federal government should take heed, too. ... Pro athletes aren’t the only people who don’t like paying high taxes; highly-skilled doctors, engineers and scientists considering a career in the United States just might take a look at the U.S. tax burden and choose to do business elsewhere.

Or, in this case, highly-skilled doctors, engineers and scientists considering a career in Oklahoma just might take a look at the Oklahoma tax burden and choose to do business in neighboring Texas. In fact, doctors, engineers and scientists are usually even less contractually bound than NBA players to stay in or move to a certain place -- so they're able to be even more responsive to economic incentives.

Oklahoma City residents are loyal to the OKC Thunder. After all, they agreed to tax themselves through the MAPS program just to bring the Thunder here. In the same way, Oklahomans at large are loyal to their home state. That's rather more reason than less, though, to reward them with the gradual phaseout of the income tax and to trust them to spend their own hard-earned dollars as they see fit.