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High taxes be damned, the rich keep moving to California (latimes.com)
54 points by spking 11 days ago | hide | past | web | favorite | 75 comments

It defines rich as 125k. That definitely isn't rich in california. It also says there's a net migration outwards and that the middle class and poor are fleeing.

> It defines rich as 125k. That definitely isn't rich in california. It also says there's a net migration outwards and that the middle class and poor are fleeing.

In addition to that, another way of interpreting the numbers is that jobs in California continue to pay well.

There is obviously a difference between California being so great that all the people who make a lot of money want to live there and California being so expensive that companies can only attract people to move there by paying a lot of money.

Might be able to afford an apartment

With a 2hr commute.

meh, if you don't have kids, $125K is plenty to live in a so so part of sunnyvale or mountain view (which is totally safe, just your apartment will be built in the '60s to working class standards, which isn't as bad as it sounds; the weather here means that having flimsy and poorly-insulated housing isn't as big of a deal as it would be otherwise.)

I mean, you won't be buying right now, but you will be able to save money; if we have another big drop in housing prices, you will be all set: otherwise, you will just have to move when you retire. (which actually is pretty sad, 'cause those social connections are really important. but just saying, if you have $125K/yr, two people can live here comfortably.)

If it's really important that you have a lot of room, you aren't going to like it here. Really, I think that's the big difference.

My own impression is that as a sysadmin without a degree, I get like 2x here what i would other places, and yeah, housing is more than 2x, but... housing is a kinda small part of my budget. I save a lot more working here, and have access to a lot more luxuries that don't involve personal space.

Honestly, if you wanted to get me to move? Probably the best thing you could promise me is a job with an office... or even just the sort of large cubicle my job role rated in the mid to late aughts. I mean, my job pays really well, the food is good and people are nice to me, and I really appreciate it, but it seems like every year my desk shrinks. I think the parking spot they reserve for the car I don't use is allocated more space than the desk where I sit all day.

>> if you don't have kids

Most adults do have kids, though. It's unreasonable to expect that one will not have kids, seeing how we're all here because our parents were in a position to have kids. So I chose to live elsewhere instead.

I support your ability to choose but so much of the commentary here is to the effect of “nobody should live in CA, living in CA is impossible, nobody wants to live in CA in fact everybody is leaving!” I’ve even seen a post say it’s negligent to consider raising kids in CA or the Bay Area. We’ve lived in the Bay Area 18 years, we have a kid and a house and save money, it took us 15 years to get to this point, if you want to just show up and have it all then maybe choose slewhere but crapping in living in CA or the Bay Area is getting tired

You have to be rich to live in California. Either that or willing to sacrifice your retirement, because saving money is nearly impossible for lower and middle class Californians. There are too many costs that come with living and working there.

Do you mean the Bay Area only or the whole state?

And immigrants have no chance?

This has been posted a few times today...


On HN, we don't count submissions as dupes if the story hasn't had significant attention yet. This is in the FAQ: https://news.ycombinator.com/newsfaq.html.

The idea is to give good stories multiple chances at attention, since otherwise the randomness in what makes it off /newest is too great.

First off, making $110k a year does not make you rich. Secondly, the article does not address the rich that live in California but make their money outside of California. Many truly rich people buy homes in California even though they have a "primary residence" outside of California.

>In fact, more wealthy people are moving to California than leaving, research indicates. It’s the poor and middle class who are departing.

The LA Times must be so proud.

And who will provide all the services that the sophisticated rich demand?

Once tax day has come and the full force of the capped SALT deduction is felt, things may change.

A high-earning couple with $500k in combined income (roughly $45k in state taxes) and a $2m home (roughly $20k in local taxes) will go from a $65k deduction to a $10k deduction.

Am half of a high earning couple in a bit above this range in California. Surprisingly, my taxes changed very little this year. In years prior, I always had to pay AMT, in which SALT deductions were already disallowed. The new tax law is basically a wash. I don't pay AMT, just pay higher regular. I didn't check exactly but my effective rate this year may even have gone down a little. Many people in this income range will find similar.

Yep, not a fan of the tax plan but it seems like a lot of folks forget about AMT. AMT made state and local tax deductions pointless.

Interesting to hear this. I used to be a high-earner (was a tax lawyer before a startup founder) in CA and never ran into the AMT. I see several folks mention the AMT below, but if no one was getting a SALT benefit before, how could the cap have been a revenue-raiser (which it was scored as) in the tax bill?

I realize that the lower rates help out high earners and can mitigate the effect of the SALT cap. But all high earners across the country get the benefit of low rates, whereas only the ones in high tax states get hit with the cap. So when weighing the choice between being a relatively high earners in a low tax state or a super high earners in a high tax state, the balance shifts toward the low tax state.

It's a revenue raiser because it does raise the taxes of people outside this range. Primarily people in 500k - 1m range were hitting AMT before, especially if married or with children.

Don't misunderstand me: I am responding only to the parent comment that the new tax law will massively change things for a 500k couple due to deductions. For that specific range for a married couple it won't (because they likely already were paying higher taxes due to AMT).

To your second point, that's also highly individual. My household income is ~800k. That makes my California effective tax rate 8.9%. I personally would have a hard time finding jobs for both my husband and myself in a new state taking only an 8.9% pay cut.

The phenomenon discussed in the article of continuing net inflow of high earners to California and out flow of middle and lower earners is not new: https://www.sacbee.com/news/state/california/article13647809...

I am not saying this is good! But the simplistic "everyone is fleeing high CA taxes" narrative is not supported by the data. What is happening is not good for California but also more complicated than that.

I would say the burden of high housing costs absolutely dwarfs the effect of taxes for most people.

> but if no one was getting a SALT benefit before, how could the cap have been a revenue-raiser (which it was scored as) in the tax bill?

It hits people with lower-but-still middle-class to upper-middle-class, who weren't hitting the AMT before but still would have state/local taxes above the SALT cap.

If you make $1 M SALT changes are bad news, if you make $500k it doesn't matter.

The media wants it to effect the middle class, so they leave that part out.

I’ve been doing the same math for NYC since I work remotely. The thing is, I can still move to another state and not pay state taxes or AMT.

I like NYC but I’m not sure I still like it tens of thousands of dollars much after this latest tax reform.

Sure, but the status quo in California didn't really change with the new tax law for this income group, contra the comment. If the taxes didn't deter you before, they aren't different now.

Wealthy != high income.

A high-earning couple might make $500K spread across 2 W-2 salaries, and then pay those $45K in state and ~$200K in federal taxes. A wealthy couple owns a network of business, reinvests all profits of those businesses in capital improvements to make more money in the future, pulls out only enough in salary to meet their expenses, makes an equivalent donation to charity to offset all their "income", and then pays zero in taxes.

Can you explain the charity portion, isn’t that the net same as not having the money? Sincere question

You get to control where it goes, rather than the government.

For most people, their values are an extension of their identity. (This, BTW, is why we get values voters on both sides of the aisle who vote against their own economic self-interest for a party that supports the kind of world they want to live in.) If you're making 2x+ times what you actually need to live the personal lifestyle you want, the rest is going to shape the world around you anyway. If you give to 501(c)3 organizations whose values happen to line up with yours (or better yet, control your own family foundation so you can set the agenda entirely), you get to write that influence off against the money that you spend on personal expenses.

I've often heard of the dividing line between upper middle class and wealthy as "Upper middle class people think income. Wealthy people think control." The vast majority of a wealthy person's wealth is held in various legal fictions anyway - a network of corporations, trusts, funds, and foundations that are each separate legal entities, but are all controlled by members of their family. Who cares if the money is in your name if it's the name of an entity that you can sign for?

Right, but the previous comment suggests that you can reduce your personal tax liability to zero while still having some personal money paid to you:

"pulls out only enough in salary to meet their expenses, makes an equivalent donation to charity to offset all their "income", and then pays zero in taxes."

and that's confusing, 'cause say I can live off $100K/yr. So I pay myself $140K (or whatever) and pay the taxes on that and I have $100K left to pay for groceries and rent or whatever.

Sure, my company maybe donated a bunch of money to some nonprofit I liked, and that decreased the company's tax liability. Maybe my company even lost money after the donations, and maybe I get to carry those losses forward... but that's not going to impact the personal income taxes on those wages I pay myself, or personal capital gains tax on the dividends I pay myself.

But that's a different thing from the tax liability on that $140K I took out to buy my groceries, and pay my rent.

I'm not a tax person, though I have been in the situation of paying both corporate and personal taxes- all I can say is that you need a properly licensed tax person in that situation, even if your business makes less than a google engineer.

No, I mean that you pay yourself $100K and then you make a donation of $100K of securities, real estate, etc. to a charity out of assets that you control. You can deduct the full amount of "in kind" transfers to charity, and you don't need to pay the capital gains tax on them. The value of your charitable donation gets subtracted from your AGI, so you really can get to zero task liability this way. Meanwhile, you reinvest the remaining profits of the business so that the total value of your assets goes up by more than the $100K you paid yourself + $100K you donated to charity.

> The value of your charitable donation gets subtracted from your AGI, so you really can get to zero task liability this way.

Of course, that's how it's supposed to work, because the reason it's set up that way is that if people actually do that, they have to donate $100K to charity in order to reduce their taxes by about a third that amount.

Assuming the charity has about equal effectiveness as the government in using the money to benefit society (note that this is not a high bar), allowing the deduction significantly increases the amount of money going to benefit society compared to if the deduction wasn't allowed and as a result the donation wasn't made.

You can argue about whether one organization or another shouldn't be considered a charity, but that's a separate question as to whether charitable donations should be deductible in general.

I pass no judgment on whether this is a good thing, only that it's a thing.

I can see the argument that maybe society would be better served by a bunch of independent charities that all take voluntary donations. I'm not sure everybody buys that, or that these are donations that wouldn't otherwise be made if there were no tax deduction.

> I can see the argument that maybe society would be better served by a bunch of independent charities that all take voluntary donations. I'm not sure everybody buys that

I think this is mostly just the argument about what should be considered a charity again. If people are donating money to the Foundation for the Preservation of High Housing Costs, that is almost certainly not better than what the government would have done with it (or, for that matter, than setting the money on fire and doing nothing), but then why should that be considered a charity?

Meanwhile the idea that the Gates Foundation isn't making better use of a dollar than the mean government expenditure is pretty ridiculous.

At that point the argument would have to be that you still need money for government services that wouldn't be provided by charities -- assuming that the roads being in disrepair wouldn't cause anyone to donate money to a road-improving charity (and that having one of those wouldn't, as is the case now, be proscribed by law). But that's only a problem if almost everyone prefers to give more of their money to charity than to give less of it to the government, otherwise there are still many people paying taxes to fund government services. And given the size of government revenues despite the existence of the charitable deduction, that is clearly not the problem.

> or that these are donations that wouldn't otherwise be made if there were no tax deduction.

It still works even if it goes the other way. If you were inclined donate $100K of your income regardless but it wasn't deductible then you'd have lost about a third of that to taxes (or more than half if you also take into account state and local taxes in California), leaving that much less for the charity.

So, there's two possibilities here that I know of.

1. you are running this all as a sole proprietorship, with no separation of business and personal money. In that case? sort of. Your accounting is going to be complex as heck. if you have $100K of assets to donate, donating those assets can offset $100K of income. you are giving up an amount equal to what you are earning to avoid taxes, it's a lot like not paying yourself, and selling and living off of the assets you donated, except you avoid some of the extra taxes you would have paid on doing that. Also note, in this case, the stuff you have to pay FICA on is... complicated, and your charitable donations usually don't get you out of FICA (which if you are rich you don't care about, but we're talking about $125K/yr, and as you are paying employee and employer, thats 15% - without selling the company or without paying both corp income tax and personal capital gains for a dividend, it's hard to take money out of a company without paying FICA.)

Note, this is pretty unusual for people who know what they are doing. This is how I started out, and it was a real mess to untangle. Most people compartmentalize their businesses into several entities, and not just for liability protection (though that is nice, too) - Accounting works much better when your money isn't just one big pool.

2. this is the common thing. your businesses are their own tax entities. You have a LLC (often several) for your real estate, an S corp for your consulting/speaking income, C corps for a lot of your other businesses:

In that case? having a business entity I control that is taxed as a c corp donate a bunch of money is going to change taxation for that entity. Not for the personal money I pay myself.

Not securities owned by the C corp, securities of the C corp. This of course requires that there be a liquid market in its stock. But this thread is about wealthy people, after all.

Gifts to charity can only be deducted up to 50% of AGI. Gifts of appreciated assets only up to 30%. If you are giving to private foundations, the limits are even lower. It is possible to carry forward excess deductions for a limited time, but that doesn't really help in the long run. If you are trying to consistently reduce your AGI to zero this approach does not work.

Reminds me of a quote:

"The secret to success is to own nothing, but control everything." ~ Nelson Rockefeller

Maybe if the charity is called "$YOUR_FAMILY_NAME Foundation" then you can save on taxes and still get to do things you enjoy, like flying your private jet to fight malaria or travel to your country club to play some golf (for charity).

Ok but how many people really have "$YOUR_FAMILY_NAME Foundation" and AREN'T being carefully watched by the Feds?

Honestly, this thread just sounds like something pulled from someone busted on NBC's "Greed" show. Not that I am opposed to reducing one's tax burden, mind you. It's just that this doesn't sound like a feasible way of doing it.

You set up your own charitable foundation/trust which you control. While technically not your money anymore, you get to decide how it gets spent. I even heard about a man who had his charity buy a portrait of himself ;-) Snark aside, lots of people with money do this and while they don't technically ever get to see that money themselves again, they can and do spend it in exchange for influence/favors.

There are limits on how much you can deduct when donating to a foundation you control. So you can’t wipe out all of your income this way, whereas there aren’t the same type of limits on donations to unrelated charities.

You can donate to your church who can then fund an anti-gay political campaign and neither of you get taxed on the money. If you tried to fund that directly, you would have gotten taxed on it first before you could spend it.

Why, yes, I am still salty that the Mormons didn't get their tax-exempt status revoked over Prop 8 in California. Thanks for asking.

[removed - this was not intended as a political comment but somehow it became such]

Planned Parenthood Federation of America (PPFA) is a tax-exempt 501c3 and does health care.

Planned Parenthood Action Fund (PPAF) is a properly taxed 501c4 and does political action.

Planned Parenthood are quite scrupulous about this given how often they wind up in the crosshairs. Would that the religious organizations received such scrutiny.

Please take your GOP disinformation points somewhere else.

$200k in Federal taxes on $500k of W-2 income (i.e. a federal tax rate of 40%) is significantly higher than the reality.

With no deductions, it's closer to $135k (24% tax rate). The marginal tax rate on 500k of income is only 35% (plus FICA, but that's 2.4%).

$45k in state (i.e. CA) taxes is about right.

Source: https://smartasset.com/taxes/income-taxes#ntLwScKyxG

This is false. Most of those deductions weren't applicable with AMT anyway. My taxes actually went down significantly this year (~20k).

I'm not a fan of the new tax plan, however that same couple would have been subject to AMT previously. The changes to AMT in the new tax plan offset the loss of deductions.

$24k, most likely. Unless this couple also has a lot of other possible deductions, they'll likely just opt for the new standard deduction, which is $24k if filing jointly. Still less than their previous deduction, but not as drastic a loss as you claim.

And with the near-elimination of AMT, it may end up being a wash for many people in this situation.

It's almost as if one of the benefits of being rich is that you don't have to worry about things like how much taxes cost. Yes, this can be interpreted in more than one way.

My take is for truly wealthy people, there is where you live for tax purposes and where you spend your time. Those people usually also have a lot of control how they register their income. And so being wealthy really just means that paying more or less taxes is a discretionary expense. Like a lot of other discretionary life style expenses they pay.

Two examples I know of. One guy who had a $200,000 RV parked in a warehouse in SF. With his office upstairs. But he didn't 'live there'. And another whose llc owns a condo by the Marina. That guy doesn't 'live there' either. Both those guys probably paying $100k/year for 'convenience'

Things change radically when you where you live for tax purposes and where you spend your time are the same place. And you can't decide how you are paid. Some friends of mine, high paid working for a fortune 500 wanted to relocate them to Waco Texas. $200k goes a lot farther in Waco TX. And yeah fuck no.

If you actually qualify as "rich" that means you have multiple estates and your primary residence is surely not in the pirate tax cove of CA.

Why would the rich care about taxes? They have thousands of loopholes at their disposal to avoid them. It's all an "expense" to them...

Yes, they keep having their estates and legal residences in Florida, Texas, etc.

Maintaining residency outside of CA/NY/etc. isn’t as simple as pretending that a home in Texas is your primary residence. These states go after high earners and audit the number of days in/out of state, as well as drivers license, and even the location of pets. When there’s lots of tax revenue on the line, they dig up the details. Source: used to be a tax lawyer.

People who can hire accountants who can bring down their tax rates to below those of their secretaries are moving to California. News at 11.

>highest-in-the-nation 13.3% income tax rate

That sounds very comfortable and affordable

Furthermore, the 7.1% (31-44k), 8.1% (44-56k), and 10.4% (56-286k) rates seem pretty excessive when those rates could be made significantly more progressive if a new bracket between 150k and 286k were created at a decently higher marginal rate, giving these 31-150k people much more productive dollars (these dollars will immediately be put back into the economy in the larger CA cities).

The very reasonable argument questioning this 13.3% top-level rate is: do the outcomes match the investment?

That's state tax, which is paid in addition to federal (nationwide) tax. Some states, like Texas, have no state income tax.

And the states without income tax usually make it up somewhere. I believe with Texas it means higher property taxes (California's are quite strictly limited thanks to the notorious Prop 13).

Texas also gets 36% of its tax revenue from sales tax:


That's state income tax on your second million and above in a given year. The rate on your first million every year is less. Like first-world problems, I guess the tax rate on income over $1MM/yr can be called a California problem.

> The rate on your first million every year is less.

Not much less. It works out to 10.8%, according to CA's tax calculator.


And no more salt deduction. Almost.

Broseph, they're paying 28% via federal as well, and social security and Medicare. If it were only 13% marginal that would be whoop-for-joy low.

(In case you're wondering -- you're likely being downvoted for calling the parent 'Broseph' -- it's a bit of a pejorative, which is uncalled for in HN's mostly civil discourse)

This is gatekeeping at best. Pejoratives are fine on HN as long as they're accompanied with something of substance. Comments like "bro this is dumb" are in a whole different class than comments like "bro here's how it works: <actual information>". Downvoting something of substance on HN because you dislike informal jargon is really silly if you think about it.

I'd like to think he got downvoted because his information was wrong (which it might be, I'm not sure, as I am not an authority on taxes).

From the guidelines https://news.ycombinator.com/newsguidelines.html :

    Be civil. Don't say things you wouldn't say face-to-face. Don't be snarky. Comments should get more civil and substantive, not less, as a topic gets more divisive.
    When disagreeing, please reply to the argument instead of calling names. "That is idiotic; 1 + 1 is 2, not 3" can be shortened to "1 + 1 is 2, not 3."
I'm not really sure what 'gatekeeping' is in this context, but I think that it is closest to calling names/snarky.

For what it's worth, the tax information is more or less accurate to the best of my knowledge.

> "That is idiotic; 1 + 1 is 2, not 3" can be shortened to "1 + 1 is 2, not 3."

Alright, you got me, they do say that in the rules after all. But, I still don't think "broseph" is bad. People call each other bro(seph) in real life all the time and it's usually a synonym for "dude", "hey", "listen". I'd say OP was going for a funny comment rather than a derisive one.

Or simply you can ignore the downvote.

Huh, I’ve only ever used it as a friendly “dude...” equivalent. Well, TIL. Thanks for the info.

I thought it was funny. Why do people get upset so easily.

Welcome to 2019

Don't shoot the messenger!

Yea i don't get it either, I have heard broseph used in a friendly way between mostly lower-middle class people in Australia.

who are white men? it's weird to be called a white male name if you're not. not upsetting just presumptuous. what if people started calling you rachel in a friendly way? sure it's friend... still feels weird and out of place... and ultimately unnecessary if you're actually trying to be friendly.

These are people posting here not robots.

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