Q&A: “Garage Logic”
Podcaster Joe Soucheray takes the Center’s John Hinderaker on a tour of Gumption County.
Robert Reich, an economist who was Secretary of Labor under President Clinton, recently tweeted
There are basically 5 ways to accumulate a billion dollars in America:
1) Profiting from a monopoly
3) Political payoffs
None of these has anything to do with being successful in the supposed free market.
— Robert Reich (@RBReich) November 10, 2019
Which category does Oscar De La Hoya (net worth $200 million) fall into? How about Manny Pacquiao ($200 million)? George Foreman ($250 million)? Or the richest of the lot, Floyd ‘Money’ Mayweather ($380 million)?
OK, we’re talking millionaires not billionaires here, but so was Senator Bernie Sanders until attacking millionaires made him a millionaire himself. Now its billionaires he wants to get rid of.
So the point stands. You might not like boxing – and after seeing what it did to my granddad I have mixed feelings about it myself – but these guys earned their money the hard way.
The Greatest – Sugar Ray Robinson
Sugar Ray Robinson was, possibly, the best pound-for-pound boxer the world has ever seen (my granddad thought so). He earned over $4 million between 1940 and 1965 when $4 million was a lot more than it is now, not bad for a black kid who was born the son of cotton, peanut, and corn farmer in Georgia.
And he enjoyed his money. A prominent part of New York’s social scene in the 1940s and 1950s, his glamorous restaurant, Sugar Ray’s, hosted stars such as Frank Sinatra, Jackie Gleason, Nat King Cole, Joe Louis, and Lena Horne among others. He drove a flamingo-pink Cadillac. According to ESPN.com’s Ron Flatter:
He was the pioneer of boxing’s bigger-than-life entourages, including a secretary, barber, masseur, voice coach, a coterie of trainers, beautiful women, a dwarf mascot and lifelong manager George Gainford.
But he’d earned the right to enjoy that money. He’d earned it from 200 fights, 173 of which he won.
But Robinson’s prime years coincided with the highest marginal tax rates in U.S. history. As a married guy filing jointly in 1951 – the year he beat Jake LaMotta for the world middleweight title, famously depicted in the movie Raging Bull – any of his earnings over $32,000 ($317,000 adjusted for inflation) were taxed 50% and the marginal rate over $300,000 ($3.0 million adjusted for inflation) was 91%. As economist Burton A. Abrams notes, the purse for Robinson’s last two fights of 1951 was reportedly in excess of $250,000 ($2.5 million adjusted for inflation). These fights
“…quite likely pushed him into the 91 percent federal tax bracket. In essence, his last fights in 1951 probably netted him only nine cents on the dollar less any income taxes due to the State of New York.”
Together, these two fights, against Randy Turpin, amounted to 25 rounds of hard boxing.
Robinson retired in 1952 but reentered the ring aged 34 in 1955. He had to. He owed the Internal Revenue Service back taxes. He earned a reported $231,000 ($2.2 million adjusted for inflation) for his first two fights. But, as Abrams explains,
Even if he was able to deduct half of this amount for business expenses, the next dollar he earned was subject to the 75 federal income tax. But he saw almost none of first two purses in 1955 as the IRS seized $171,000 [$1.6 million adjusted for inflation] immediately to pay for back taxes.
After his 1955 comeback, Robinson fought for another decade. And, as he fought to pay off his IRS debt, he incurred more debt on his new earnings. In that decade Robinson fought 63 fights containing 523 rounds; an estimated 1,569 minutes or 26.15 hours of pugilism before finally retiring aged 44. Robinson saw little benefit from this, as Abrams notes “[M]ost of his boxing revenues after 1952 went to paying current and back taxes”.
In a later age, Robinson’s tax burden would have been lower. A taste for pink Cadillacs is an expensive one even today, but Robinson would have spent less time in the ring working for the IRS. By the time of his death in 1989, Robinson suffered from Alzheimer’s disease and lived in relative poverty. Just as the Mafia took a large slice of Sonny Liston, the IRS took a large slice of Sugar Ray Robinson.
John Phelan is an economist at the Center of the American Experiment.