Tonight, the Timberwolves take on the Denver Nuggets at Target Center looking to take a 3-0 lead in the Western Conference Semi Final. After eclipsing the Phoenix Suns 4-0 in the First Round, it is fair to say that we are watching the best Timberwolves team in franchise history.

How can this be? After all, I have written before that Minnesota’s high taxes handicap our sports franchises and here we have one conquering all before it.

This point was made in a column for the Minnesota Reformer. “For the second edition of Tax and Spend, I was planning to respond to yet another Star Tribune op-ed declaring that high taxes are ruining Minnesota,” it argues, “Then the Timberwolves did it for me.”

…[I]t just so happens that some of the state’s most vocal anti-tax conservatives have been arguing for years that Minnesota’s relatively higher tax rates impair the success of our sports franchises. Their theory — supported by two academic papers by Minneapolis Federal Reserve economist Erik Hembre — is that teams in higher-tax states win less because highly skilled free agents choose to play for franchises in lower-tax states.

The author concludes that “the Timberwolves’ breakout season is the perfect illustration of the absurdity of this world view. “

Anecdote < Data

It is difficult to overstate how silly this argument is. My great aunt Lil smoked a pack of cigarettes a day and died aged 86: presumably the author of the Reformer column would claim that she “is the perfect illustration of the absurdity” of the belief that smoking is bad for you.

If you look hard enough or wait long enough you can find an anecdote to “illustrate” almost anything. Neither the Vikings nor the Wild made the play offs this year so what does that tell us about the state’s taxes? This year is the the Timberwolves’ first appearance in the Conference Semi Finals since Friends was on TV, what does that tell us?

But that isn’t how social science works. It isn’t, as the Reformer column’s author thinks, rooted in the the search for anecdotes. It is rooted in the collection and analysis of data.

I have based my writings on this subject on two papers. In “State Income Taxes and Team Performance: Do Teams Bear the Burden?,” Hembre investigates “the effect of income tax rates on professional team performance using data from professional baseball, basketball, football, and hockey leagues” “between 1995 and 2017.” [Emphasis added] “Touchdowns, Sacks and Income Tax – How the Taxman decides who wins the Super Bowl” – which, contra the Reformer column’s author, was not written by Hembre but by Matthias Petutschnig from the the Vienna University of Economics and Business – looked at “performance data (wins, winning percentage) of all NFL teams over the time-span 1994-2016 for the regular season.” [Emphasis added]

And, if you want to get specific about basketball, a paper by economist Timothy E. Zimmer titled “Implications of State Income Tax Policy on NBA Franchise Success: Tax Policy, Professional Sports, and Collective Bargaining” finds that:

…state income tax policy has an influence on team performance. The higher the rate for the top marginal tax bracket, the greater the negative bias on team performance. Team performance is dependent on the successful acquisition of quality resources which include players, coaches, and team management. The results infer that NBA franchises located in high tax states impose a burden on the ability of team ownership to attract the best resources in order to achieve success. The relationship could have broader implications on professional sports and their Collective Bargaining Agreements.

Zimmer does not base this finding on one great season from a franchise in a low tax state or one bad season for a high tax state franchise, but on “data for eleven years (2000 through 2010) of previous NBA seasons.” [Emphasis added]

Not just taxes, but also taxes

It would be foolish to argue that “tax rates are…the dominant force determining our state’s economic conditions.” In my recent paper “The X-Factor? Social capital and economic well-being: A quantitative analysis,” I concluded that:

…54.9 percent of the variation in median household income across…2,897 [counties] can be explained by variations in the components of social capital: Family Unity, Community Health, Institutional Health, and Collective Efficacy.

But it would also be foolish to argue that tax rates are not a factor at all, as even the Reformer column’s author grudgingly admits, and they are a factor over which the state government has direct control, unlike, say, Family Unity.

Besides, making the foolish argument that “tax rates are…the dominant force determining our state’s economic conditions” is exactly what the Minnesota Reformer so often does, attributing any and all positives in our state to its high taxes and spending. Indeed, despite its name the Reformer is one of the most consistent opponents of reform in Minnesota.

Does winning matter in sports?

Then again, maybe these academics are looking at it all wrong? The author of the Reformer column writes:

For his paper on the relationship between income tax rates and franchise success, Hembre examined win percentages. Obviously this is a very reasonable metric for an academic study. But to torture the metaphor a bit, is maximizing total wins in a given season the ultimate goal of a basketball franchise? 

Read that again. Let us hope that maximizing wins is what the Timberwolves are all about tonight.

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