By Brittany De Lea FOX Business
The fallout from the NYC wealthy high-tax exodus
The Hill columnist Kristin Tate on the economic impact on New York City from the high-tax exodus of wealthy residents.
Lawmakers in high-tax states are engaged in an ongoing fight against the $10,000 cap imposed on state and local tax (SALT) deductions – as more taxpayers become frustrated with mounting obligations.
Experts say they receive multiple inquiries every week from people located in states, like New York and New Jersey, who are interested in potentially establishing a new domicile to alleviate those burdens.
Tom Corrie, a principal and head of the state and local tax group at Friedman LLP, told FOX Business that he receives “several inquiries per week” regarding a potential change of residency from New York to a state with either no income tax, or a lower tax rate. Corrie’s accounting firm is headquartered in New York City.
“In light of the inability of an individual to deduct state and local income taxes on their federal return under the new tax law, moving to a low or no-tax state can be a very attractive alternative to individuals,” Corrie said. “The question always is how much is a person of means willing to change his or her lifestyle to accommodate a financial plan?”
Corrie added that many of the people who come to him with these types of questions are high net worth individuals who are about to engage in a transaction – like the sale of a business or real estate located outside of New York. He noted the businesses or properties are often being held in an LLC, and the sale is picked up on individuals’ personal income tax returns in their home state.
Geoffrey Weinstein, special counsel in the Tax, Trusts & Estates Department of Cole Schotz, told FOX Business he receives direct calls about twice a week. Weinstein has offices in both Florida and New Jersey.
During this year’s tax season – as people were in the throes of figuring out how changes to the tax code were affecting them personally – Weinstein said he was receiving up to four calls per week from people who wanted information about changing their state of residence. Like Corrie, some of the calls Weinstein receives are from people with pass-through businesses in New Jersey and New York.
As previously reported by FOX Business, there could be another flood of frustrated taxpayers looking to flee higher-tax states as the extended tax deadline approaches this fall.
Additionally, the Treasury Department recently issued guidance disallowing a workaround high-tax states, like New York, were hoping to use in order to limit the impact of the $10,000 SALT cap on residents. That, too, could speed up moves.
The $10,000 cap is well below the average amounts claimed by individuals in states like New York, California and New Jersey. The average deduction claimed in California, for example, is $22,000, according to Kevin de Leon, a Democratic member of the California Senate.
While Florida received more movers than any other state last year, according to data from the U.S. Census Bureau, New York’s outflows to the Sunshine State were the highest – 63,772 people. New York had the third-largest outflows of any state, with 452,580 people moving out within the past year. California, another high-tax state, had the largest outflow of domestic residents – with the highest proportion of people headed to Texas, Arizona and Washington.
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