Exhibit A: If You Tax Something, You Get Less of It
A recent CD post suggested that whenver possible, at least some people will make changes to their behavior when faced with changes in tax rates, and will adjust/shift the timing and amount of income received to minimize taxes.
Some evidence of changing behavior for tax avoidance is provided in this article "MLB Agents Ponder Beating Potential Tax Increase":
Looking ahead to the possibility of an Obama administration, some baseball agents already are thinking about trying to beat a possible tax increase for their well-paid clients.
Democratic presidential candidate Barack Obama has proposed increasing the top federal income tax rate from 35% to 39.6%, where it was under the Clinton administration. If signing bonuses are paid before Jan. 1, they likely would be taxed at the current rate and would not be subject to any tax increase.
Free agents can't start negotiating money with all teams until Nov. 14. Only a relatively small percentage of contracts are finalized before Jan. 1. Still, for a big-money free agent earning $10 million in 2009, Obama's plan could increase his federal tax by more than $400,000.
Agent Scott Boras, negotiating eight- and possibly nine-figure deals for free agents Manny Ramirez and Mark Teixeira, already has thought about the possibility of asking for larger signing bonuses payable this year in some of his contracts.
"There's some consideration to be had with the impact of the election," he said.
HT: Bill Whitley, who writes "It didn't take long for your prediction to come true."