Accepted a job with a year-long deferral to do a prestigious postdoc. Now a better job came along Last year I got one tenure-track job offer and accepted it, even though I wasn't thrilled about the position. The institution allowed me to defer my start date by a year, so that I can complete a postdoc. I fully intended to start the job when I signed the offer. 

Now, several months later, I received a tenure-track offer from a top institution with resources and benefits that can never be matched by the institution that is currently waiting on me. 

I understand it is unethical for me to bail on Institution 1. At the same time, I only have one life and one career and don't want to sacrifice my prospect for loyalty to an institution where I haven't even started working. 

What would you do? 

EDIT: What are the range of professional consequences I can expect if I switch to the new institution?
Be upfront, be polite, and be quick.
First make a decision if you really want to accept the second offer. If, so make sure you sign the contract with the institution that made the second offer. At that point, inform the institution who made the initial offer ASAP and let them know in the most polite way that you cannot follow through with the contract you have signed. It will be painful and embarrassing and there is no way to avoid this situation. Then you will feel relieved and can start with the new job.

The institution you dumped might still be able to contact other candidates who were shortlisted. I do not see any other way of handling this, other ways will involve making some excuse and later they would find out that you are at a different institution. Better be embarrassed now and save face later.