
They Got Rich Off Uber and Lyft. Then They Moved to Low-Tax States - pseudolus
https://www.nytimes.com/2019/05/09/technology/uber-lyft-low-tax-millennials.html
======
fpgaminer
For anyone thinking of moving out of California before/during a major tax
event, I _highly_ advise finding and planning with a really good CPA and a tax
lawyer that they recommend.

I've not personally done it, but I've had my fair share of small talk with
CPAs who regal you with "funny" stories about people who attempt to move out
of California to avoid the high tax rate when, e.g., they sell their business
or some other major tax event.

The California FTB is extremely aggressive in these cases. They will both
investigate and sue you. It doesn't take much imagination to know what being
sued by a state government is going to be like. (The California FTB is a
double edged sword; I've had pleasant and helpful experiences any time I've
called them up and asked tax questions; but their attentiveness goes both ways
it seems)

So you better have an immaculate plan in place to prove that you have indeed
moved out of the state. One person went as far as making sure to keep every
Starbucks receipt from their daily coffee trips after moving to Seattle. (And
yes, they had to use that evidence)

This only applies to high net worth individuals, and I'm sure the stories can
be exaggerated. But a couple hundred bucks of a CPA and lawyer time is worth
every penny of the horror you might save in fighting with the FTB.

Also, I didn't see it called out in the article, but the biggest downside of
California's tax code isn't so much the high tax rate as it is the treatment
of capital gains. California doesn't give special treatment to long term
capital gains like the IRS does. So the difference is exaggerated in that
case; you're paying a marginal of 20% to the IRS and a marginal of 13% to
California. That's rough. I do generally agree with California's way of doing
it, but with the way things are today I can see why many HNWI at least
fantasize about moving out of California.

Finally, there are some other tricks to avoid California's tax that have
varying rates of effectiveness depending on your situation and desires. I find
CRTs to be quite interesting if you find yourself in a situation where you
have a high tax FU money event and want to both avoid taxes and do good for
the world.

------
almost_usual
>San Francisco, which has gotten increasingly expensive, crowded and filled
with carbon-copy tech bros who drone on about their start-ups. They talked
about how they were resetting their lives, how stressed they had been in tech
and how they were getting over burnout. They talked about the tech parties
they had attended and complained that the celebrations revolved around work.

Ironic the bubbles we create end up making the city you live in "carbon
copied". Take public transit, volunteer, meet some locals, there are plenty of
people who live in SF that don't work in tech.

~~~
compiler-guy
Yes. The tech-bros are most visible in all the "happening spots" and downtown
near all the tech companies--which shouldn't be a surprise.

But there are lots of non tech-bros around Lake Merritt and other parts of the
city. It is getting harder for them to stay, but many are still here for now.

------
tabtab
There's no evidence that rich are leaving CA in droves. If you like to show
off your fancy stuff, there's more people to show it to in CA than TX.
Mansions are for ego, not for practical use. If anything, the middle-class is
shrinking because housing costs are so high. The homeless come for the
weather, so CA is becoming rich or poor, and less middle.

~~~
the_watcher
Last I checked, California had a negative net migration rate while Texas has a
positive one.

~~~
socalnate1
"Migration among certain demographic groups also differs from the state’s
general pattern. Although California has had net out-migration among most
demographic groups, it has gained among those with higher incomes ($110,000
per year or more) and higher levels of education (graduate degrees)."

[https://lao.ca.gov/laoecontax/article/detail/265](https://lao.ca.gov/laoecontax/article/detail/265)

~~~
data_spy
That data is several years old now (up to 2016). Anecdotal but most of my
high-income friends left in the past 1.5 years.

~~~
vernie
I've been hearing this shit about Texas for at least a decade.

~~~
the_watcher
Related: Texas has had positive net migration for that entire decade. Also
related: rich people retiring to a low tax state wasn't invented by young
techies.

------
socalnate1
This is just a anecdote; here is some data:

[https://lao.ca.gov/laoecontax/article/detail/265](https://lao.ca.gov/laoecontax/article/detail/265)

"Although California has had net out-migration among most demographic groups,
it has gained among those with higher incomes ($110,000 per year or more) and
higher levels of education (graduate degrees)."

~~~
refurb
One of the biggest migrations is coming from NYC, which has a city tax on top
of state and federal. So maybe moving from NYC to CA is still a net reduction
in taxes?

Also, the age bracket for in-migration is 25-35. So the typical story of
people maximizing their career potential _despite_ high taxes. If they had the
same career/income opportunity in a lower tax state, would they take it?

~~~
asdfasgasdgasdg
NYC's city tax plus the state come out to 11%-ish at the margin for someone
bringing in 500k a year. CA's state taxes are in the same ballpark. Plus, NY's
property taxes tend to be a bit lower. I'll be paying about $10k/y (unabated)
on a $2.4M condo, whereas my house in CA was costing $24k/y on an asset price
of $1.7M.

So, I don't think that the reasons to move from NY to CA have much to do with
taxes. Having lived in both NYC and Norcal (on the peninsula), I can say that
the cost of living in both places is in the same order of magnitude. For me,
the main differences are that CA has much better weather and access to the
great outdoors, but NYC has a more interesting culture and better food and
commuting. I think CA is probably a better place to start your career as a
software engineer, but once you're established, there are plenty of
opportunities in both places.

------
pjdemers
Unless they made 7 million or more (after taxes), they will need a job again.
The life expectancy of a 35 year old is 50 more years. That is effectively
forever when managing money. Single digit millions will not sustain an upper
middle class life style forever, even in Texas. When they need a job again,
they are better to look where their network and friends are. So stay close to
them.

~~~
CuriouslyC
Even 2 million at a very safe 2% is still 40k/year without touching the
principle. That's livable if your house and vehicle are paid for and you have
very simple tastes. Realistically you could easily do a lot better through a
mix of leveraged rental property and stocks.

~~~
asdfasgasdgasdg
Just for a little context, that 40k would be tax free, since the first 40k of
cap gains are untaxed. So you'd actually be netting out more than the median
American. So, move anywhere where median Americans live, buy a reasonably
sized house, and you'll be cruising. I have family that recently bought a huge
house bordering on mansion sized in Salt Lake City for under 500k. So if you
have $2.5M in the bank and you buy that kind of house with cash, you have a
very livable nest egg that should allow you to cruise through the rest of your
life not just in acceptable conditions, but in abundance.

~~~
SilasX
>Just for a little context, that 40k would be tax free, since the first 40k of
cap gains are untaxed.

Wait, what? How do you figure? First, the $40k referred to is interest on the
$2 million, not capital gains. Second, all interest over a trivial amount is
taxed as ordinary income. (If it comes from a mutual fund with stock
ownership, it could have qualified dividends taxed at a lower rate, but it's
still taxed.)

Anyway, I agree it can get you a comfortable life, but you're definitely
paying taxes on it.

~~~
asdfasgasdgasdg
Generally you'd source some of your "income" from capital gains, and some from
dividends. You wouldn't use interest at all. The first 24k of dividends would
fall under the standard deduction, assuming you're married. Assuming your
"income" is coming half from cap gains and half from dividends, that yields a
0% tax rate (20k dividends @0% and 20k cap gains @0%). And this is of course
assuming nothing comes from retirement accounts. In that case, the situation
is even more advantageous.

~~~
sys_64738
The 2019 Standard Deduction for married filing jointly is $24.4k.

~~~
asdfasgasdgasdg
I'm aware ("the first 24k of dividends would fall under the standard
deduction" \-- from my post). I think you're trying to correct something in my
comment, but since I already mentioned the fact you posted, I think you must
have misunderstood something, or I must have been unclear. Could you make it
more obvious what your objection is?

~~~
sys_64738
I'm not objecting to anything. Simply mentioning that the std deduction is
400$ more for 2019. Peace.

------
huac
employee 50 at lyft made ~1M over 4 years from their stock gains, i'm assuming
that they have not sold much of that stock. fb and google tripled their stock
price between 2013 and 2017, and fb quadrupled the stock price from 2013 to
now. at that rate, to make a 1M stock package over 4 years only required a
stock grant worth between 250k-350k over 4 years, which is rich but does not
seem out of the reach of engineers with a few years experience.

is the risk premium really worth it?

~~~
harryh
He also joined Lyft as a "Support Associate"[1] where he, presumably, got a
stock grant that was much much smaller than those for more in demand roles.

He would not have been able to get a stock grant from FB or Google like you
describe. It's fine to talk about the risk premium, but you're making an
apples to oranges comparison here.

1\. [https://www.linkedin.com/in/nathan-
rodriguez-05653226/](https://www.linkedin.com/in/nathan-rodriguez-05653226/)

~~~
huac
ah, i didn't actually dig that deeply, that makes sense. i guess my belief in
startups isn't completely shaken, then!

it's interesting then that both of the people who were interviewed for this
article were in non-tech roles (uber guy was in a marketing role).

------
kingnothing
The headline and most of the article is misleading, implying that you can
leave the state to avoid paying taxes on deferred income like RSUs. You can't.

A small blurb of truth from TFA: "California imposes an income tax on shares
vested in the state, but does not tax stock that is sold after someone moves
away."

This means that the company you work for is going to sell and send the
proceeds from basically 40% of your RSUs to the Fed + California governments
to pay owed tax, even if you don't life in California at the time the company
goes public or has another liquidity event. Anything you hold longer that is
subject to capital gains wherever you live.

[https://www.ftb.ca.gov/forms/misc/1100.shtml](https://www.ftb.ca.gov/forms/misc/1100.shtml)

------
Gys
> the semiretired tech millennial who left California after getting rich

Anecdotal story, without any actual numbers. So some left and some did not.
Maybe most of them stay ?

------
subroutine
California has always been a playground for the young. I moved here about a
decade ago, when I was 19, from a small town in Illinois. It was for no
particular reason other than it sounded like fun; and it was incredible. The
first time I saw any ocean irl was the evening I arrived. I remember how
powerful it seemed in the twilight; like I shouldn't get too close, or it'd
swallow me up. I immediately set-out along the boardwalk hitting every
retailer, cafe, surf shop, bar, and headshop along the way. Within an hour I
had landed the dream job... Sketchers. mutha. flippin. shoes y'all! I was a
bohemian in paradise, and lived happily ever after.

Fast forward 10 years. I'm totally over the beach. Haven't been to a bar/club
in over 6 months. Weeks away from defending my phd at ucsd in computational
neuro. anyone here hiring? My only two major preferences: (1) no shoe stores,
and (2) not california

~~~
socalnate1
I feel like being "weeks away from defending my phd at ucsd in computational
neuro" is maybe the most important variable in your story and how you feel
about life right now :)

~~~
NotSammyHagar
Good luck op (above) on finishing your phd, nothing else matters at this
point. After you finish your phd you'll have to decide what to do. Likely you
are a great programmer (thus the computational in your 'area'). If you decide
to go into building software the world is your oyster, there will be plenty of
dev jobs. It will be harder unless you have a connection with a particular job
to find something in your particular area (this is true of any computer
related phd of course).

------
mountainofdeath
One thing to note, the article makes it seem like everybody will make retire
early level millions. The reality is, only the first hundred or so will make
serious money and this for a mega-unicorn that happens once or twice a
generation. Normal exists only make huge money for the investors, the founders
and maybe a handful of key employees, not all of which were early (e.g.
external CEO hires).

~~~
davidjnelson
I’ve watched people make a few million on an ipo as an engineer joining a few
years pre ipo at your typical unicorn company. I really don’t think it’s
uncommon. The thing is, these people do not retire. But they do buy a house.

------
RickJWagner
So they worked hard where the work was, then took their money and moved where
it'll last longest.

Sounds smart to me. Nothing shady about it, just playing your cards right. (As
a bonus, they leave a high-paying spot and a place to live for someone else to
advance into back in California.)

Kudos to the winners in this game.

------
MagicPropmaker
Well, why not?! If it weren't for the ability to move, California, New York,
and MA would probably have state tax rates of 50% by now.

------
exolymph
Well yeah, that's the whole point of federalism.

------
onlyfortoday2
awesome :)

------
gok
What monsters. Next we're going to hear these parasites itemized their tax
deductions!

------
gamblor956
This happens a lot of time for tax evasion (not avoidance) purposes but people
don't realize that if they leave CA/NY after negotiations to sell stock have
begun, they are still subject to tax on the sale in their original home
states.

~~~
the_watcher
Not exactly. They are taxed when the stock vests in the state of the grant,
but not on the sale value (as I understand the law).

~~~
refurb
That makes sense. So let's say your awarded a pile of shares at $1. A year
later they vest at a price of $4, so you pay CA taxes on the $3 of
appreciation.

The company goes nuts and the share price is now $40, so you relocate to TX,
establish residency (and cut off CA residency), then sell. CA gets nothing and
you pay TX taxes on the $36 of appreciation?

~~~
mrkstu
Which would be exactly $0 in Texas as we have no income tax whatsoever...

~~~
refurb
Not even a capital gains tax? I know NH doesn't have an income tax, but they
do have a capital gains tax.

~~~
mrkstu
Yep, nothing on top of the Fed side,

[https://taxfoundation.org/how-high-are-capital-gains-tax-
rat...](https://taxfoundation.org/how-high-are-capital-gains-tax-rates-your-
state/)

"The state with the highest top marginal capital gains tax rate is California
(33 percent), followed by New York (31.5 percent), Oregon (31 percent) and
Minnesota (30.9 percent).

The nine states with no personal income tax (Alaska, Florida, Nevada, New
Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming) have the
lowest rate in the United States (25 percent)."

Hmmm... interesting that the article disagrees with you on NH.

Further research shows they do not currently tax capital gains, but that they
are looking into adding one:

[https://www.watchdog.org/new_hampshire/new-hampshire-
house-m...](https://www.watchdog.org/new_hampshire/new-hampshire-house-
mulling-imposition-of-percent-capital-gains-
tax/article_281b2756-443d-11e9-be38-3347e5abf203.html)

~~~
the_watcher
Why is the top Texas blended (state + local + federal) capital gains tax rate
25%, despite the federal top rate being 23.8% and Texas having no state
capital gains rate? This seems consistent across all no capital gains tax
states, so it can't be a local rate, right?

------
malvosenior
So what? Why is the New York Times even writing about this? They are free to
do what they want with their money. They were early employees at companies
that built products people liked and they were appropriately rewarded. This
whole article reads like bait to get people jealous and upset at "those damn
techies!". Sure enough if you look at the comments it seems to have worked.

How transparent does the NYT have to be in their desire to destroy the
competition (the internet) before people stop reading it?

~~~
compiler-guy
That's pretty harsh. The reason the NYT writes about anything is because its
editors thinks it will attract readers. Usually people read things because the
topic is interesting.

I found the topic interesting. Particularly the net worth at which the folks
are leaving SF to go to Austin. One guy with a several hundred thousand;
someone else with a couple million.

It would be interesting to know the mean and median of these sorts of numbers.

SF is a tough place to live financially these days, and learning about the
alternatives is interesting.

~~~
malvosenior
The NYT writes not only to attract readers, but also to defend its business
model and push the politics of its employees. Attacking Silicon Valley
startups accomplishes both of those goals.

I _didn 't_ find the article interesting at all. In addition to being naked
propaganda the content itself was insight free as it's just a couple of
anecdotes about moderately successful people moving to a new city.

~~~
dictum
> push the politics of its employees

Defense of the status quo is ideology too.

To see the information portrayed in the article as normal and good is a
political position, just like seeing it as bad is a political position.

But even if pro-business pragmatism weren't an ideological alignment, politics
isn't some dirty thing that innately sullies everything and should be avoided.

~~~
malvosenior
By your logic, it's literally impossible to be non-political. Do you believe
that to be the case?

> politics isn't some dirty thing that innately sullies everything and should
> be avoided.

I strongly disagree with this statement.

~~~
dictum
My reply should be longer and more helpful, but I'm unable to write clearly
right now, so I'll be short but regrettably not nuanced: if it involves other
people and shared resources, I don't think you can make it non-political.

If you see politics — not _being a politician_ or _partisanship_ , which have
different implications — as inherently bad, you are not seeing politics for
what it is; you are seeing politics as some evil process, run by a cabal or by
a mob, and your position as inherently logical and reasoned.

This is a bad idea even if you have a good reason to believe you're right.
Rumsfeld's "unknown unknowns" are part of why this is a problem.

Let me add a weird metaphor: you are saying smell is something that only comes
from perfume, rotten organic matter and certain chemical products. You may not
perceive the toned-down smell of things you are surrounded by, like wood,
plastics or the air in your office.

~~~
malvosenior
This is a good response and I see your point. I don't fully agree though. If
someone is making decisions based on their finances, I think it's unhelpful to
frame it as "politics" just because there may be some tax implications (the
shared resources in your example). If people are moving to a lower tax state
to save money, that's not a political decision in my opinion. It's a totally
logical financial decision an individual is making.

Now, why I say that this article is political (and unjust imo) is because that
very personal and logical decision is being placed _by someone else_ into the
realm of politics.

