Wealth Flight

[Deleted]

This Op-Ed from the IBD is food for thought:

Editorial: New York Prices Itself Out Of The Market

Posted 02/24/2011 07:12 PM ET

Fiscal Policy: Anyone who believes high tax rates bring prosperity need only look at New York. Soak-the-rich rates there contribute to a wealth and talent drain the state can't afford.

To help their state weather the recession, New York lawmakers in 2009 adopted a surcharge on personal income taxes for those making more than $200,000.

Called a "millionaire's tax" even though 76% of those who pay it are not millionaires, the levy lifted the top rate by 31%. It was intended to be temporary.

But according to a report by the Partnership for New York City, a group of 200 CEOs, "interest groups that depend on state spending are pressing for permanent extension of the surcharge."

With New York already having the second-heaviest state tax burden in the country, according to the Tax Foundation, this would be a mistake.

According to the partnership, the rich and the productive have been leaving the state for "places where the tax burden is less" for years.

"Between 1998 and 2008, a net total of more than 1.7 million New Yorkers chose to relocate, taking with them their wealth and talent," it says. "More income has left New York than any other state in the nation — $71.7 billion from 1993 to 2008."

The average net worth of those moving out of the state was $338,000. By contrast, the average net worth of households moving into Connecticut was $625,000 while those moving to New Jersey were worth nearly $653,000.

The group also says a "significant portion" moved to Florida and Texas, "two states with no state or local income taxes, a very low cost of living, and a reasonable and predictable regulatory environment in which to conduct business."

"Both states," says the partnership, "have prospered as a result."

As profound as the exodus from New York has been since 1993, it actually picked up after the "millionaire's tax" was imposed in 2009. The number of New York taxpayers worth $1 million or more fell 9.4% from 2007 to 2009, from 381,786 to 345,892. It will only grow worse if the surcharge is made permanent.

Some wealth did move into New York between 1993 and 2008, but it was not enough to replace what was lost. For every dollar the state gained, $1.71 left. No other state had a worse ratio.

The loss of wealthy residents translates into lost business opportunities and poor job creation. It also adds to the tax burden of those who remain. Is that what Albany lawmakers had in mind when they decided to strong-arm the rich?

Most of the country is watching Wisconsin, where the governor is doing the right thing to balance the budget. But much could be learned from New York, where for decades lawmakers have been doing things wrong.

[DVM gone riding]

yet despite this TX is as messed up as CA as far as budget/funding goes. I hate taxes but actually think TX needs higher taxes to do what it needs to do (basics not frills) as a state (I don't live there my brother does)

[dragonfly7]

This message has been deleted.

[Deleted]

When lawmakers think they can balance budgets by soaking the wealthy, they forget that the wealthy have more options than the average taxpayer. Buy a second house in the Ozarks and spend enough time there and voila, you're a resident of MO. My former BIL and SIL are in that bracket and they have homes in NYC and NJ. Their legal residence is NJ. Then there's the whole offshore asset thing, which isn't as easy as it used to be, but if you've got multi-millions I;m sure you can find someone to help you with it.

[Savoir Faire-Demogague in NJ]

New York State, and NYC are making up the loss in tax revenue by hitting the middle class residents with increased levies, fees, more summons and increased property taxes.

Andrew Cuomo's recent tv commercials hit this message right on point.

[phil5185]

In addition to NY, other business-unfriendly states - CA, WA, WI - are seeing an exodus of businesses and workers. CA, especially, is losing small businesses, shops with about 50 to 100 employees, to AZ, NV, & TX. It is more efficient to produce metal castings, plastic molded parts, metal products, etc in AZ and truck to customers in CA than to produce them in CA.

Governors seem to be blind to the effect of pricing - ie, raising tax rates often result in lower tax revenues. The end game would be ~100% tax rate but with no one left to pay it.

[souldoubt]

As is usually the case raising taxes backfires when the wealthy avoid them by either moving or using good accountants and the burden falls on the middle class. As mentioned we've seen an exodus of small business owners, wealthy individuals, people who actually pay income taxes and documented workers from CA for a while now. Considering this state has almost 1/3 of the welfare recipients in the country you can see that it's a continued recipe for disaster.

[parker1b2]

I see this a lot in NJ. I have had friends, college buddies and former co-workers that once they got married and started families they left the state due to taxes and the HCOL. A lot, of young families are struggling here so they are picking up and moving to PA or the Carolinas.

[Savoir Faire-Demogague in NJ]

I see this a lot in NJ. I have had friends, college buddies and former co-workers that once they got married and started families they left the state due to taxes and the HCOL. A lot, of young families are struggling here so they are picking up and moving to PA or the Carolinas.

Back in 2007, my son, DIL and grandson moved out of NJ due to the cost of living.
Nearly $70 billion in wealth has also left the state, and residents are fleeing at a rate of 50,000 per year.

[zibazinski]

No surprise there. DF is changing his address to take advantage of FL tax laws and car insurance costs because MI is too expensive for both. I have a place here so we use that address.

[illinicheme]

I moved out of NJ......but ended up in CA. So I doubt that counts as wealth flight!

[tt00]

I have moved my stuff already down to FL because of this. Then once my small business expands it will probably be move offshore.

[Deleted]

Mar 22, 2011 13:38:43 GMT -5 zibazinski said:

No surprise there. DF is changing his address to take advantage of FL tax laws and car insurance costs because MI is too expensive for both. I have a place here so we use that address.

Be careful with the car insurance. They want to know where it is "principally garaged". If he gets in an accident with it in Michigan and they find he's been living and working there, at the very least they'll bill him for the extra premium.

[zibazinski]

Thanks.

[lurkyloo]

It's not quite as easy for those of us whose income is tied to being wage slaves--maybe New York workers can successfully live in NJ (although aren't they trying to crack down on that too? cf the vacation home as basis for NY taxation?). We'd have an awful time commuting t coastal California...that said, the state is a complete financial mess and we won't be retiring here. The plan is to amass wealth during our high earning years and then retreat somewhere that's more fiscally responsible. I periodically conclude that despite my not-quite-six-figure salary, we'd be just as well off financially if DH took a slightly lower-paying job in a lower COL area and I quit work entirely. It's kind of a pisser.

[Deleted]

Mar 23, 2011 10:40:35 GMT -5 lurkyloo said:

I periodically conclude that despite my not-quite-six-figure salary, we'd be just as well off financially if DH took a slightly lower-paying job in a lower COL area and I quit work entirely. It's kind of a pisser.

Yeah, I don't know why anyone lives in CA except that I've been to San Diego and I've ridden down the Pacific Coast Highway near LA while sitting in the passenger seat of a yellow convertible. Tempting, but it was nice to go home to my 30-minute commute and my mortgage payment that wouldn't buy a garage in a bad neighborhood in LA.

When I lived in NJ I knew of 2 couples who were planning to move soon- one to Michigan and one to TX- because they could get much more house for their money elsewhere. The couple moving to Michigan were realtors and they weren't very good (DH used them to sell his house when we moved out of NJ and it was a big mistake). I hope they're doing OK.

[souldoubt]

Like living just about anywhere long enough you can develop a love hate relationship with it. In CA I love the weather, my job and the fact that my friends and family are mostly all still here. I hate the fact that the state has far too many people living off the government and not really paying any income taxes while chasing out wage earners, small business owners and so on because of taxes. I've always hated the rat race but if I moved away right now to a place that's more laid back I'd get bored and homesick.

Traffic can suck depending on your commute but I work less than 10 miles from my house and can get home without getting on a freeway. No way in hell would I live 30 miles from work because the freeways here are a joke. Down the line I might move somewhere more laid back when I have a family and/or retire but for the time being I've got no problem making a living here.

[t-dog]

souldoubt - I have to ditto you - so much to both love and hate here in CA!

[bobbysgirl]

TBIRD: I think you are on to something here with #2. They make so much more in the after the government role money. Don't they also continue benefits from the job?