State Income Tax: not always perfect

[threeonesix]

Maybe their friends and family are already there and this is just the final push they needed. That is certainly my case.

"A little money" though is relative. In my personal case I'd save about $30,000 a year just by making my Florida home my permanent residence. Not a lot, but not chump change either.

I guess I meant only the people for whom that is not the case.

 

[threeonesix]

I think we're talking about seriously wealthy people who have many (or at least several) homes, usually fully staffed at all times so they can casually move among them.

Still, do these people never spend time with their family/friends? Most of what's left of my family lives far away from me now, but I spend 3-4 nights every week hanging out with my various friends. Otherwise I would get very bored, and when I get very bored I start spending money on hobbies at which I think I will be good and enjoy. Which rarely turns out to be the case. It's the reason my 3-car garage has 1 car and 2 stalls full of tools and other "toys".

 

[CaliKid]

Taxes were not a key motivating factor but they were a consideration. I will admit it has been a very nice benefit of moving from Cali to NV. Depending on a person's income level this is not an insignificant number.

Of course need to watch property taxes. I know TX and FL have very high income taxes in comparison to California (by percentage) AND re-assess frequently to further raise taxes. Luckily NV property taxes are about the same as Cali so a non issue for us.

 

[threeonesix]

Probably best to create a new thread (please feel free to move this post, mods), but do any of you have good ideas to combat this problem? Kansas loses population every year, and taxes are often cited as a reason. Our legislature is currently possibly passing a pretty large tax reform package that will lower income taxes, eliminate SS income taxes and lower state property taxes. But I honestly don't believe that is going to stop the outflow of taxpayers.

Personally, I believe it has more to do with "there's nothing to do here", a common refrain of younger people. And mostly they are correct. Only Rhode Island has fewer total acres of public land than Kansas, and RI is geographically smaller than the county I live in (Butler), let alone our entire state. Back when I was a kid you could feel safe hiking, hunting, fishing, biking, etc. on other people's land here. All of the mobile meth labs from Missouri back in the 90's/00's ruined that. Now the landowners shoot first, and the state supports that for the most part.

 

[braumeister]

people will move to another state if the political leaders in their state tax them too much and they have other alternatives. Politicians have to act more like a business and realize that their constituants (customers) have other options and may act on them. Don't be surprised if they move if they get a better offer.

I think that's very well put.
Regardless of the state and the taxpayer, there are many sliding scales and what works beautifully for one person is a nonstarter for another.

The paper I started the thread with simply put the results of some academic research into saying that.

 

[MarieIG]

Many factors may play into a retiree's quality of life.

It is up to the particular retiree to give weight to each when considering a move.

 

[badatmath]

If I were only looking at taxes for where to live in retirement, I wouldn't live in Southern CA. But as a percentage of our total budget, it's a small factor... Have a paid for house with prop 13 low tax rates. No W2 income, but pay taxes on rental income and inherited IRA RMDs plus a tiny pension. Husband has some SS, but that's treated somewhat favorably.

But - we have *perfect* weather. I walk the dog on the beach at least 25 days a month. (High tide or drizzle effects 5 or so days a month). My sister lives in the same area. I have friends dating back to grade school. And my husband (a Philly native) has informed me we are never moving from San Diego.

There's more to 'what makes a good place to live' than taxes.

Need a roommate? I'd love to have nice walking weather.

 

[Stormy Kromer]

For some politicians (Governors and legislators) the attitude seems to be "Tax them, what are they going to do....move?

In today's mobile society they will move.

 

[RetiredHappy]

Our friends are very wealthy and keep 2 homes, one in CA and one in NV. They declare NV as their legal residence. NV is fairly lax in their legal residency qualifier, as long as you intend for it to be your legal residence you are OK. In CA, it is pretty stringent, where if you spend 6 months out of a year there, you are a legal resident for tax purposes. Our friends spend more than 6 months out of a year in CA and they have been getting away with not paying CA income taxes so far, at least 10 years. Their CA home is worth about $8M and their NV is about $3M. Obviously they have not been audited by CA Franchise tax board, yet.

 

[marko]

Probably best to create a new thread (please feel free to move this post, mods), but do any of you have good ideas to combat this problem? Kansas loses population every year, and taxes are often cited as a reason. Our legislature is currently possibly passing a pretty large tax reform package that will lower income taxes, eliminate SS income taxes and lower state property taxes. But I honestly don't believe that is going to stop the outflow of taxpayers.
.

I may not have the exact numbers but they're pretty close IIRC: In Mass, 20% of kids age 25 to 35 plan on leaving the state.

Two of our own nephews moved out of Mass in January. In their case, the overall quality of life and COL was the issue. They each have two other friends who left before them and encouraged them to join them.

 

[Calico]

I may not have the exact numbers but they're pretty close IIRC: In Mass, 20% of kids age 25 to 35 plan on leaving the state.

Two of our own nephews moved out of Mass in January. In their case, the overall quality of life and COL was the issue. They each have two other friends who left before them and encouraged them to join them.

My younger sister lived in Boston and worked in Cambridge for the past 40 years.

She retired 18 months ago, and moved to Pittsburgh a month ago. Apparently PA doesn't tax a single dollar of any kind of retirement income.

She said she moved because she couldn't afford to live in Cambridge any longer.

 

[Gumby]

When I planned for retirement, I planned for the taxes - federal, state and property - as well. I would not have retired if it required me to move to avoid taxes.

 

[youbet]

We can also get a 90% tax credit for donations to any Catholic school we choose, through a foundation, that is used to reduce tuition for those in financial need..

I'm surprised they can favor one specific religion. Is it the foundation that makes that possible?

 

[Surewhitey]

We moved to Dallas in 99 ignorant of the tax tail. 16 years later, we moved back aware of some of the tax benefits and planned accordingly. Deferred boatloads in California for 4 years and took distributions after moving back to Dallas. Worked perfectly for us.

Of course DD & DGK's are here too... We never intended to be permanent in CA & had a plan.

 

[athena53]

When I planned for retirement, I planned for the taxes - federal, state and property - as well. I would not have retired if it required me to move to avoid taxes.

I agree but in many of the cases here people chose which of two homes was their primary domicile taking taxes into consideration. In my case, I may move to Iowa (where I'll be near DS and DDIL) a couple of years earlier if the tax benefit is significant.

I do know people whose parents moved far away to a LCOL area in retirement to save money and as their capabilities declined, expected the kids to come running out every time they needed them, or ended up having to move back near family. Not a good plan.

 

[marko]

My younger sister lived in Boston and worked in Cambridge for the past 40 years.

She said she moved because she couldn't afford to live in Cambridge any longer.

Who can? With small, two bedroom homes going for over a million, I really don't get it.

SIL is a realtor in Cambridge and says most of the buyers are from Asia or oil countries buying lodging for their child who's a student at MIT or Harvard. And paying cash!

 

[marko]

Only slightly off topic:
CNBC this morning offered a segment about how US millionaires are now applying for dual citizenship and passports (or third and fourth). "...hedging their risk..." they cite political, social unrest and taxes as well as wanting to travel more safely under a non US passport.

This link to CNBC may or may not work https://www.cnbc.com/video/2024/04/...es-what-to-know.html?__source=androidappshare

 

[LateToFIRE]

Our friends are very wealthy and keep 2 homes, one in CA and one in NV. They declare NV as their legal residence. NV is fairly lax in their legal residency qualifier, as long as you intend for it to be your legal residence you are OK. In CA, it is pretty stringent, where if you spend 6 months out of a year there, you are a legal resident for tax purposes. Our friends spend more than 6 months out of a year in CA and they have been getting away with not paying CA income taxes so far, at least 10 years. Their CA home is worth about $8M and their NV is about $3M. Obviously they have not been audited by CA Franchise tax board, yet.

I have a number of retired wealthy friends and some of them have moved to take advantage of lower taxes - these are folks with a least two homes. A couple of them moved to Texas, and numerous of them have moved to Florida. Mind you, most still have a home in NYC, but for tax purposes they are domiciled elsewhere. NYC is pretty strict about chasing down locational arbitragers, so I see my friends playing all kinds of games - like paying for everything in cash whenever they are in the city, or routing expenses through an LLC (or other trust or c-corp) established solely for this purpose. I would be playing some of these games except I need to retain my NYC residency status in order to get the homeowner capital gains exemption when we sell our place. Once that's done, I'm outta here, at least for residency purposes.

P.S. Being a NYC resident has cost me at least $25K a year in income taxes. That's on top of Fed and State. Now, in retirement would be a different income picture - maybe.

 

[marko]

I have a number of retired wealthy friends and some of them have moved to take advantage of lower taxes - these are folks with a least two homes. A couple of them moved to Texas, and numerous of them have moved to Florida. Mind you, most still have a home in NYC, but for tax purposes they are domiciled elsewhere. NYC is pretty strict about chasing down locational arbitragers, so I see my friends playing all kinds of games - like paying for everything in cash whenever they are in the city, or routing expenses through an LLC (or other trust or c-corp) established solely for this purpose. I would be playing some of these games except I need to retain my NYC residency status in order to get the homeowner capital gains exemption when we sell our place. Once that's done, I'm outta here, at least for residency purposes.

Massachusetts is similarly "difficult" to officially move out even when it's legit. In Florida lawyers regularly advertise on helping you legally relocate.

 

[foxcreek9]

Only slightly off topic:
CNBC this morning offered a segment about how US millionaires are now applying for dual citizenship and passports (or third and fourth). "...hedging their risk..." they cite political, social unrest and taxes as well as wanting to travel more safely under a non US passport.

This link to CNBC may or may not work https://www.cnbc.com/video/2024/04/...es-what-to-know.html?__source=androidappshare

Agree with the benefits of traveling with a non-US passport for safety reasons, but severe social/political unrest in US will embolden the new Axis powers and there will be no western place "safe".

 

[MichaelB]

The thread topic is interesting and there’s more to discuss, so let’s please stick to it.

 

[athena53]

Only slightly off topic:
CNBC this morning offered a segment about how US millionaires are now applying for dual citizenship and passports (or third and fourth).

Yeah, that's a tactic. I know you can become a citizen of Malta if you invest some amount in property there and other countries are eager to welcome American $$ as well. I'm pretty sure you have to renounce your US citizenship in order to avoid US income taxes but some people may be OK with that if the tax savings justify it.

 

[rk911]

These states that raise taxes on the "rich" usually fail to raise the expected income. States somehow expect taxpayers to just take that year after year when they have options.

A former governor of NY imploring the wealthy to return to NYC. Seems there was an exodus of wealthy from the city to the Hamptons.

https://thehill.com/homenews/state-watch/510829-cuomo-calls-on-wealthy-to-return-to-new-york-city-you-got-to-come-back/#:~:text=',-by%20J.&text=New%20York%20Gov.,stay%20and%20file%20taxes%20there.

 

[Stormy Kromer]

My good friend is a corporate pilot. He has flown for several extremely wealthy people.

One was a CEO of a large company in St Paul, MN. He was a resident of South Dakota. He commuted in a Hawker jet. He said it paid for itself in less than a year. He documented where he slept every night and made certain it was in South Dakota for at least 190 days.

I know that state income tax applies where you earn the money, but it appears he was paid in stock options or some other method as a resident of South Dakota. One year his bonus was over $500 million. Minnesota's personal income tax rate is about 7%. South Dakota doesn't have one.

 

[ncbill]

My kid plans to never change his Florida residency as long as he stays active duty.

Especially considering state taxes at his current posting.