
High-tax states like California and New York make it hard for rich to leave - mykowebhn
https://www.mercurynews.com/2019/03/04/high-tax-states-make-it-hard-for-the-rich-to-leave/
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myrandomcomment
As a personal point, my taxes went up $18K because of this change. It is my
personal belief that the change in the tax code here was specifically targeted
blue states for political reasons by the republicans. My wife and I are
thinking about leaving after the kid finishes school. The interesting thing is
the long term consequences might be that enough people leave NY and CA and
move to traditional red states to change them to blue. To be clear we were
already thinking about moving before this change. This just add one more
reason.

~~~
darawk
> It is my personal belief that the change in the tax code here was
> specifically targeted blue states for political reasons by the republicans

While this is definitely true, as someone who also lives in a high tax state
and is impacted by this change, it is the policy-wise correct way to do
taxation.

Under the old system, state goverments, by enacting an income tax of their
own, could essentially steal part of the federal government's tax revenue.
There's really no good reason for this. State government's revenue collection
shouldn't funge against the federal government's revenue collection.

While I don't like the higher tax burden I think from a federal policy
perspective it was the correct move. I'd like to see the states lower their
taxes, or switch to a tax scheme other than an income-based one in response,
but I wouldn't want to see this change repealed. Unfortunately for my personal
finances, it was the right thing to do, even if the motivation on the part of
the republicans was as a "fuck you" to blue states.

~~~
jrs235
>state goverments, by enacting an income tax of their own, could essentially
steal part of the federal government's tax revenue

Funny that it is the red states that tend to get more federal dollars
returned/pumped into their states than they contribute. It's ridiculous to say
the the blue states are stealing.

>There's really no good reason for this.

Republicans typically talking about being for smaller [Federal] government
should like that the [blue] states are trying to solve the problems most
important and local to them via their own means.

~~~
jdhn
>Funny that it is the red states that tend to get more federal dollars
returned/pumped into their states than they contribute.

Perhaps we should look into what type of federal dollars are flowing to the
red states, and then shrink those programs.

~~~
deadmetheny
>Perhaps we should look into what type of federal dollars are flowing to the
red states, and then shrink those programs.

So we're cutting safety net programs for the poor and elderly and agricultural
subsidies. Call me crazy here but I don't think "fuck the poor and the
farmers" is a very solid plan.

~~~
moate
Cutting agg subsidies is an extremely complicated issue that has major
economic impact here and around the globe. I'm in favor of killing many of
them for the greater global good. Especially cotton.

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erentz
I’ve not understood this and am strangely on the side of removing all
deductions.

Why should anyone pay less federal tax than a person living across the border
just because you pay tax to your state?

If you don’t like it and think the other state is right not to collect income
tax and that state is doing better for it, then surely it’s on you and
everyone who agrees to set about voting to remove your own state tax. Not to
expect the federal government to give you a special deduction that the other
person doesn’t get.

~~~
pwthornton
It's a double taxation thing. It's not like low-tax states don't have
services. They simply rely on the federal government to provide them.

States that have low state and local taxes do so because the federal
government subsidizes their low taxness.

States with higher local and state taxes are subsidizing the low-tax states.
In addition, the higher-tax states are also more productive.

If anything, the argument should be that the federal government should stop
providing so much assistance to low-tax states.

There are perverse incentives at work here, however. The Senate provides every
state with the same amount of representation. So a state with a small
population can choose not to tax itself much and simply rely on federal
spending bills to cover a lot of its needs.

The SALT deduction has existed from the very beginning of the federal income
tax. Part of its purpose is to incentivize states so that they don't simply
stop spending their own money and pushing everything off onto the federal
government:

"The Revenue Act of 1913, which introduced the federal income tax, states that
'all national, state, county, school, and municipal taxes paid within the
year, not including those assessed against local benefits' can be deducted."

~~~
erentz
That’s not double taxation. The federal government takes X% of the total. The
state government takes Y% of the total. They’re aware of each other. They can
coordinate accordingly.

Avoidance of double taxation is not accomplished with a deduction it is done
with a tax credit. That is when I pay A% of tax first to the country of
primary residence, and then work out I need to pay B% to a country that has
secondary claim on it, I can deduct the whole amount of A tax from B tax.

I understand the inequitable spending. Yes richer states subsidize poorer
states. But is the right solution to that a complication of the tax system? I
don’t think so. I think that’s a spending problem that should be addressed for
what it is. And it will never be possible to have equitable spending. There
will always be poorer and richer parts of the country. We can’t make the
poorer parts richer by giving them less money. Within a state like CA or NY
there are also richer and poorer parts that may not get equal spending from
the state.

People in CA and NY get a raw deal mostly because they wind up paying as much
(if not often more) taxes as countries that offer universal healthcare, or
better education, (and which can manage to build a friggen railway). But that
again isn’t resolved by an extra federal deduction. It’s resolved by
addressing the dysfunctions or poor spending priorities head on.

To which the complaint is usually again that the fault lays with the poor “red
states” who prevent that. To which I say, no stop scape goating. Nancy Pelosi
is from CA and doesn’t support fixing any of those things. She’s a blue state
representative at the highest level of the house. So no, CA and NY politicians
are just as much a part of the problem. Stop blaming “red staters”.

~~~
daveFNbuck
> They’re aware of each other. They can coordinate accordingly.

The thing you're arguing against is coordination.

------
rconti
Headline should be "High-tax states like California and New York do not like
it when you pretend to live elsewhere in order to avoid taxes."

Every example seemed to be about people who were trying to dodge taxes while
still actually having the "high tax" state as a de-facto primary residence.

~~~
exegete
At least in the case of New York they still tax non-residents on income earned
from New York. (I realize it may be less for non-residents than residents). It
seems strange that I am legally obligated to pay taxes to a State but have no
vote in the choosing representatives who levy those taxes.

~~~
rconti
That's a good point. That's a thing in California too. There's a 540NR for
reporting non-resident income earned in California. I guess it never seemed
'unfair' to me because when I was a non-resident I was a student who spent
most of my time in CA, and that's where I worked, so it seemed logical.

In some more complicated situations where you technically earn money in the
state even though you don't have a home there, I could see how it would feel
unfair. (I can't think of such a situation off the top of my head, but I'm
sure they exist.. actually the athlete example might be a good one).

~~~
exegete
Yes, that's true. Most people who work in a state use some of that state's
services (e.g., public transit, emergency services, etc.) and hopefully the
state they do reside in gives some kind of credit for those payments.

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Causality1
Headline is misleading. Should be "High tax states like California and New
York make it hard for the rich to fake leaving".

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tracker1
I thought everyone wanted the rich to pay their fair share? This change mostly
affects the rich, it's even in the title of TFA. It's where the richest in the
country live that is most affected.

Personally, I'd like to see income taxes removed entirely in favor of
sales/import/export taxes.

~~~
standardUser
"I thought everyone wanted the rich to pay their fair share?"

There is a growing consensus that those with vast and rapidly increasing
accumulations of wealth should pay more taxes. Not upper-middle income
families in expensive metros.

~~~
refurb
Just like the old adage "An alcoholic is someone who has one more drink than I
do", being rich is always "someone who makes more than I do."

~~~
standardUser
"being rich is always "someone who makes more than I do."

In recent American discourse, the metric is usually the top 1% or a fraction
of the top 1% (in terms of wealth and /or income). These aren't our well off
neighbors, these are families that are astronomically wealthy. The top 1% of
wealthiest households in the US possess more wealth than the bottom 90%.

There are _plenty_ of people with more money then me who are nowhere near that
top 1%, but few people are clamoring for them to pay more in taxes.

~~~
refurb
Top 1% in the US is a household income over $450k. That’s easily exceeded in a
couple who both work in tech. We’re not talking about the super wealthy at
all.

------
asabjorn
It is worthwhile looking at the mechanics of the individual and collective US
perspective.

Individual in high-tax-state: From an individual perspective living in a high
tax state like California, not being able to deduct state taxes in excess of
$10000 from federal taxes is effectively a tax increase.

For federal US as a collective: For the US as a federal whole deducting an
increased state tax from federal taxes is effectively a reduction of the
federal tax percentage, especially when states vote for increasing taxes to
fund projects that are not delegated from democratic consensus at the federal
level.

Capping the deduction at $10k per individual makes it equal for all citizens
regardless of which state they live in.

This is therefore in some ways a fight between competing visions of what the
US should be.

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lsiebert
I believe studies have shown that wealthy people aren't dramatically affected
by tax rates in terms of where they live. So this seems to be more about where
people say they live.

Per this, 98% of millionares don't move based on income tax:

[https://www.citylab.com/equity/2016/06/do-taxes-really-
cause...](https://www.citylab.com/equity/2016/06/do-taxes-really-cause-the-
rich-to-move/487835/)

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jayess
So people in high tax states vote for higher taxes, then complain when they
have to actually pay those taxes?

~~~
jandrese
New York and California went for Hillary, so they didn't vote for these
increases.

~~~
niij
GP was referring to higher state taxes. I believe. People in those states
voted for higher state taxes and got it, but now that they can't deduct them
from federal income tax, it's starting to sting.

~~~
moate
But the two are tied. The assumption was that the local tax increases wouldn't
be as burdensome on the tax payer in those states because it would be offset
by the SALT deduction at the federal level. The whole picture can be
considered.

Someone living in NJ could easily be offered a tax increase from a state
lawmaker, feel that there is a benefit to them in the service that tax will
pay for, do the math and realize that with the SALT deduction, they wouldn't
be paying any extra money in taxes for their services. Changing the SALT
deduction is what changes the math here.

They weren't voting for "higher taxes" they were voting for "more services".

~~~
niij
They were voting to keep the money for their state and short the federal
government. That's how the unlimited SALT deduction worked and it gave states
an incentive to raise taxes sky high, because it didn't affect the residents
of the state, it just dropped what the federal government took in. If I was in
one of those states I would've agreed with it too: keep more money for
ourselves at no additional cost!

Now the law has changed where, regardless of state, your federal tax burden
remains the same. It leveled the playing field and states will have to adapt
and lower their taxes, otherwise risk losing residents to states where tax
money is better managed.

~~~
moate
>>It leveled the playing field and states will have to adapt and lower their
taxes, otherwise risk losing residents to states where tax money is better
managed.

The assumption that the tax money is poorly managed is a misrepresentation.
They aren't just lowering taxes, they're also going to be cutting services (or
finding new revenue streams). Assuming the states lower their taxes to bring
residents in line with their previous combined tax bill, is it realistic to
expect that these states are going to get the same funding for the same types
of projects from the Feds? No. So while it's "leveling the playing field" it's
also a kick in the dick to states with higher State/Local tax levels and
forces them to scramble.

But hey, look at all those Florida billionaires flush with cash that they're
going to trickle down on us now...

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hopler
Headline doesn't match article. the article explains how it's easy to fake
residency for tax purposes, buy putting a few cheap props I the low tax state.
Judges don't understand that things that are precious to low wealth
individuals are easy for wealthy individuals to buy, cheap relative to the tax
bills. The first example was the $400K tax cancelled because the guy hired a
dogsitter in Texas.

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luxuryballs
for anyone else who couldn’t view due to ad-block:
[http://archive.is/awD3C](http://archive.is/awD3C)

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itchyjunk
So the states are not making it hard to leave but making it hard to pretend to
leave?

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doggydogs94
Totally eliminating the SALT deduction would end this discussion.

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ykevinator
I don't mind taxes, I hate waste. New York has the best schools libraries and
sidewalks. I wish we didn't blow billions on stupid stuff.

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mac01021
Pretty bad title.

tldr: if you don't actually cut all ties (property holdings and business
dealings) with your state of origin, they my try to tax you as though you
reside there still.

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NotAnEconomist
We should remove the California and New York subsidy:

We subsidize their social services at the expense of the nation by allowing
them to deduct local taxes from national taxes -- lowering their effective
national tax rate as a reward for giving their residents back tax money via
services.

I'm for tax equity: stop subsidizing the wealthy states for hoarding their
money.

~~~
pwthornton
You have this backwards. California and New York subsidize the nation (along
with other productive, higher tax states), not the other way around.

If you get rid of SALT entirely, which has always existed as part of the
federal income tax, you incentivize states to stop spending their own money
and relying on the federal government for everything.

The idea to get rid of SALT might make sense if the federal government
provided few services and had a small budget. Imagine if the federal
government had a budget 1/10th of its current size. In that world, state and
local governments would pick up the slack with their taxation and spending.

Many smaller, so-called "low tax states" simply don't provide services to
their residents, and instead rely on the federal government to subsidize them.
Medicaid expansion, which many lower-tax/poorer/less healthy states have
benefited greatly from is paid for by higher-tax/richer/more healthy states.

It doesn't make sense for the federal government to further incentivize low
productivity states to mooch off of more productive parts of the economy.

~~~
Shivetya
The key factor you are leaving out is, California and New York, also have very
large numbers of very wealthy people, who pay on average a much higher
percentage of all taxes in this country. That California and New York charge
their residents higher rates is immaterial to this.

Hence the change is a soak the rich change would you would think that
progressives would like. the same tax law changes included raising the
standard deduction to twelve thousand thereby giving the poor, the middle
class, and even portions of the upper middle class, a bigger write off. The
only people negatively affected by the change are in income categories far in
excess of the average American. The same people who many claim are not paying
their fair share.

Well here is the simple truth, the wealth needed to pay for all the programs
politicians are wanted cannot be made off the backs of billionaires. There
aren't enough of them. You could take all their money and barely pay a year of
the government. However the wealth does exist in the upper income earners,
those north of hundred thousand and more. Over twenty percent of America is
beyond that income level and they are most likely to be affected.

So, you have to ask yourself, who do we need to help? Who do we tax to pay for
it?

~~~
dsfyu404ed
>Hence the change is a soak the rich change would you would think that
progressives would like. the same tax law changes included raising the
standard deduction to twelve thousand thereby giving the poor, the middle
class, and even portions of the upper middle class, a bigger write off.

Even filing as a single male in a state that collects tax like it's going out
of style and making a respectable tech salary I had a net decrease in taxes
paid this year compared to last. That increase in standard deduction helped a
lot of people. The inability to deduct SALT only hurt people who itemize and
with the higher deduction very few people need to itemize.

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Tsubasachan
Rich people don't leave because of taxes, they have money after all. They can
pay. California and New York are places were the rich and famous WANT to be.
Its also coincedentally the places were they make their fortunes. Alabama
could abolish taxes and the 5% aren't moving there.

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ThomPete
Ive said it before. The rich dont pay income tax because they dont have an
income, they use long term capital gains and carried interest.

Not sure why I am getting downvoted. Did I say anything factually wrong?

~~~
dahdum
The underlying theory is that the corporation generating those gains or
dividends was already taxed on that income before distribution.

Most economists love the idea of a 0% corporate income tax, which would likely
be paired with LTCG going to the earned income rate. Unfortunately it sounds
too much like a "handout" to be politically viable.

~~~
ThomPete
The point is that the really rich get little income (ex. Bezos paying himself
around 80K a year) and instead use ex. capital gains to only pay 20%.

I don't mind this system it benefits me greatly too. But it's absurd that I
pay close to 50% in tax (I live in New York) from the income I make from the
actual work I do and much less when I invest.

That model seems backward as my income is actually the best indicator of how
much value I provide.

Where as the potential upside from an investment or buying a house is so big
it dwarf any income most people can make.

