Amid growing income inequality and an overabundance of federal spending to tackle the pandemic, tax policy now dominates a number of key properties in the daily news cycle. The advisers say that has prompted many New York millionaires and billionaires to rethink whether Manhattan and the Hamptons are the best places for them to live.
After campaigning for tax increases on corporations and households earning at least $ 400,000 a year, President Joe Biden recently revealed his infrastructure plans. The Proposed 2.3 trillion dollars , among other things, will increase the corporate income tax rate from 21% to 28%.
The state of New York is also is willing to raise state income taxes for people earning at least $ 1 million. The new tax rate, combined with the leading New York City rate, will create the highest tax rate in the country. Since Thursday, the budget deal with the tax increase awaits Governor Andrew Cuomo’s Signature.
‘If tax money improves our societies and economies, those individuals will, in fact, be the main beneficiaries.’
There is also tax action elsewhere. Lawmakers in Hawaii considered an attempt to raise the state’s top rate to 16%. That would be the country Highest price, but invoice seems to have stalled. Some Minnesota Lawmakers also want wealthy residents to pay more state taxes. The top rate there is 9.85%.
In September, New Jersey lawmakers reach an agreement so that the state’s highest rate of 10.75% applies earlier, starting with households of $ 1 million instead of $ 5 million. Washington state is considering one taxing billionaires.
President and CEO Jamie Dimon notes more of the tax outlook for those at the top.
Democrats may admit that the “wholesome fear” of the big government “is not unreasonable,” he wrote. Republicans may admit that if spending is wisely made on issues like infrastructure and education, it’s a good idea, he added.
“And that most likely means higher taxes on the wealthy,” Dimon writes in The letter is 66 pages long. “If that happens, the wealthy should remember that if tax money improves our societies and economies, they will in fact be the main beneficiaries.”
Dimon, worth $ 1.9 billionNew York resident, according to Forbes’ new 2021 issue of its list of billionaires. A JPMorgan Chase spokesman said the company declined to comment on the letter.
‘Taxes on people with higher incomes can backfire if they want to leave the state altogether. The biggest fear is that they will move forever. ”
Jared Walczak, vice president for state projects at the Tax Foundation, a right-wing ideological organization, says states should be cautious if they want to keep their richer residents. often provide a large portion of tax revenue.
“Taxes on people with higher incomes can backfire if they want to leave the state altogether,” Walczak said. “The biggest fear is that they move forever.”
The pandemic, he said, highlighted that portability. “Suddenly, your job may follow you, instead of pursuing your own.”
The tax burden is just one reason that influences a person’s decision to stay or go, he said. “For tax-sensitive people, there’s never been a better time to move to lower tax jurisdictions.”
Exhibit A: Tesla
$ 177 billion by CEO Jeff Bezos.
Walczak points to a study that, like the New Jersey State Department of Finance’s assessment of the so-called original “millionaire tax” in 2004, a tax of 8.97 percent on households earning the least. 500,000 dollars a year. About 20,000 taxpayers left the state after it was enacted, carrying $ 2.5 billion in income with them, said research.
43% of billionaires 65 and older who live in a property tax state have moved to a state with no law.
Frederick Peters, chief executive officer of Warburg Realty based at Madison Avenue, told the Financial Times: “If you feel like your city is treating you like an enemy and you already own a position in Palm Beach, that seems like a moment of turmoil.” “Rich people should not feel like enemies,” he added. They should feel like partners. ”
What’s more, it’s not just the income tax law that can make a difference. The elite were very concerned with the real estate tax laws where they lived. About 43% of billionaires aged 65 and over who originally lived in a state with property taxes moved to a state that had no law, according to research from the Federal Reserve Bank of San Francisco and the University of California, Berkeley.
Others, however, are skeptical of a mass exodus of the millionaire class. Cristobal Young, Cornell University professor and author of “Legend of the Millionaire’s Tax Flight”, write in her 2017 book: “Moving is a young person’s game, but earning income in the top quintile is not. Migration happens a lot when people are making a career. “
Young sifted through 45 million tax records of people making at least $ 1 million. “People almost never move when they’re in their career development,” he added, “a time when they’re more likely to face the millionaire tax.”
Customers are more open to moving to a state with low tax jurisdiction, such as Texas, Florida and Nevada.
Bill McDevitt, director of taxation at WilkinGuttenplan, an accounting and consulting firm based in New York and New Jersey, said that as soon as news of New York’s budget deal came up, customers arrested again. First questioned moving to states with lower taxes.
“People are opening their minds to somewhere with low tax jurisdiction,” said McDevitt. Some popular places to visit are Texas, Florida and Nevada, he added.
There are many factors that hold people back. Nearby, he said, was a “big anchor” and so was a nearby business.
But there are issues that could push them towards it. McDevitt sees it start with a $ 10,000 federal deductible limit on state and local taxes that will be in effect until 2025. Then comes the pandemic mass test of telework and now a heated talk about more taxes.
McDevitt says many of his customers talk about mobility, but few talk about it. “It didn’t happen like a landslide, like an erosion,” he said.