State legislatures and governors believe that they can keep raising income taxes whenever they want. Well, perhaps they can, but that doesn’t mean everyone has to subject themselves to it.
Most people will complain about it and then just go about their lives a little shorter in the cash side. However, those wealthy enough have choices and many are choosing states with little or no state income tax such as Florida, Nevada, Texas, Wyoming, Alaska and New Hampshire. One such person is billionaire Carl Icahn, worth over $20 billion according to Bloomberg and his Company’s income is over $1.5 billion. This situation has been further exacerbated by the 2017 tax act removal of the deduction on the federal return for state and local income and real estate taxes in excess of $10,000. As soon as this bill was enacted, Florida Governor Rick Scott started soliciting the very wealthy to relocate to Florida.
The most likely candidates to move their domicile and primary residence are the wealthiest and possibly their businesses. Many billionaires have moved to Florida for state tax reasons including David Tepper, Paul Tudor and Eddie Lampert. David Tepper is said to have cost New Jersey over $300 million in tax revenues.
NY, NJ and California have the three highest state taxes with Connecticut not too far behind, so they would likely lose the most tax revenue. “Millionaire taxation” is a popular campaign promise but actually results in revenue loss due to the loss of revenue from those at the highest income levels that move. Carl Icahn is also moving his business offices so there will also be a loss of jobs in New York State.
We, as well as other accounting firms, have many clients that we consult with on the advisability of relocating their domicile and/or business to Florida or other low tax states. A previous blog was posted in 2015 that you might find informative.
Barry Horowitz, CPA, MST, Partner in charge of our State and Local Tax group assisted in the preparation of this blog. If you have any questions or concerns about any residency issues, please contact Barry directly at [email protected] or 212.829.3211.
Do not hesitate to contact me with any business or financial questions at [email protected] or fill out the form below.
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