California Legislators Propose a State Estate Tax

[skipro33]

No pants? What do the neighbors say?

The wimmen, they scream. And grown men curse.

 

[Another Reader]

Low income and young people without high levels of education are leaving, the wealthy and better educated are moving in. Most of the people who have left made under $30K.
https://www.sandiegouniontribune.co...thy-people-per-report-20180221-htmlstory.html


"Of those who left during the latest years for which statistics exist, the vast majority earned less than $30,000 per year. A net total of 469,000 of those leaving had no college degree. Given the prevailing levels of rents and home prices in California, it’s easy to see their financial motive in leaving for far lower-priced states like Texas, Nevada, Oregon and Arizona. But as lower-income residents left there was a net increase of 52,700 residents from other states making more than $50,000 per year who do have at least a bachelor’s degree"
https://www.davisenterprise.com/forum/opinion-columns/whos-leaving-california-its-not-who-you-think/

If only poor folks are leaving, what accounts for the huge run up in home prices in Denver, Boise, Portland, Bend, Seattle, Reno, Phoenix, and Prescott? All those places are big destinations for former Californians. No one making $30k a year is buying a house in any of those places. Meanwhile, a lot of the inbound migration is from Mexico, Central America, Southeast Asia, India, China, and the Philippines. Some of these people are highly educated and bring wealth with them. The majority, probably not.

 

[aja8888]

Low income and young people without high levels of education are leaving, the wealthy and better educated are moving in. Most of the people who have left made under $30K.
https://www.sandiegouniontribune.co...thy-people-per-report-20180221-htmlstory.html


"Of those who left during the latest years for which statistics exist, the vast majority earned less than $30,000 per year. A net total of 469,000 of those leaving had no college degree. Given the prevailing levels of rents and home prices in California, it’s easy to see their financial motive in leaving for far lower-priced states like Texas, Nevada, Oregon and Arizona. But as lower-income residents left there was a net increase of 52,700 residents from other states making more than $50,000 per year who do have at least a bachelor’s degree"
https://www.davisenterprise.com/forum/opinion-columns/whos-leaving-california-its-not-who-you-think/

My BIL, age mid-60's lives in Santa Clara, CA. He has been in the Silicon Valley for 40 years (ex Connecticut native like me). He was KPMG's top tax accountant for 25+ years and built up a huge client base of very rich people and companies. Those included Central Valley farmers (huge spreads) and SI startup's like Apple, Intel, etc, etc.

At 60, KPMG retires partners and he was the top tax guy, but had to leave. Due to his inability to hang it up, he now works "part time" doing "wealth management" consulting for many of his ex-clients with the biggest part of his practice focusing on assisting those wealthy clients in estate planning, private corporation restructuring, and tax minimization. Much of this focuses on helping move these clients and their potential heirs out of California permanently with the least negative impact on their assets.

He said he has more work than he had when he was at KPMG! Not bad when he can bill at $750/hr to do this stuff.

 

[explanade]

OTOH ...

https://www.washingtonpost.com/busi...braries/?noredirect=on&utm_term=.a9e2339e27aa

mod edit - a snippet
A new study published in the journal Social Science Research finds that Americans report greater levels of happiness in states that spend more money on public goods such as parks, libraries, infrastructure and public safety.

 

[daylatedollarshort]

This. If I had the choice, I'd rather defer my taxes until after I die. The money I had left at the end is money that I had saved for an economic disaster that didn't occur. Once I'm dead, I don't need that money any more.

That said, if one state has an unusually high estate tax, that state certainly runs the risk of older, wealthier people leaving just to avoid the tax. That type of risk is much lower for a federal tax.

On the flip side, currently in California children can inherit property from their parents and pay very little tax on property worth millions, even if they just choose to rent out the property. Prop 13 has a lock in effect for older homeowners, so new laws that nudge retirees out of their houses might not be such a bad thing.

 

[marko]

But those days are coming to an end, by the very people they support and the need for never ending new sources of revenue. Instead of just taking income, they will come after accumulated wealth. It will be at first for those edge cases, like the "super" wealthy who have more than $5 million, or a 'transaction tax' to grab some of those windfall profits associated with capital gains, or maybe just a grab at additional taxes on capital gains.

Are you speculating or do you have some inside information?

 

[daylatedollarshort]

If only poor folks are leaving, what accounts for the huge run up in home prices in Denver, Boise, Portland, Bend, Seattle, Reno, Phoenix, and Prescott? All those places are big destinations for former Californians. No one making $30k a year is buying a house in any of those places. Meanwhile, a lot of the inbound migration is from Mexico, Central America, Southeast Asia, India, China, and the Philippines. Some of these people are highly educated and bring wealth with them. The majority, probably not.

The studies posted were by residents, not household income. Our adult kids' friends who make $30 - $40K per year and left the Bay Area due to housing costs can afford nicer housing in places like Oregon. With a partner or roommate each making $35K that is $70K household income.

Housing markets in places like Denver are impacted by many factors like the recent tax law changes, housing supply, under building during the recession years, local economy, rising mortgage rates, etc. I read a few articles on Denver home prices and none even mentioned migration from California as a major factor. According to this Redfin report, "The places attracting the most people are mostly the same regions that have been growing throughout the past year, including Sacramento, Atlanta, Phoenix and Portland. The metro areas seeing the biggest inflows of new residents are the big cities where home prices are still relatively affordable and job markets are strong. Median prices in the metro areas seeing the largest net inflow average around $150,000 below prices in the metro areas with the largest net outflow."

As for California immigrants, they are on both ends of the educational spectrum.

 

[copyright1997reloaded]

Are you speculating or do you have some inside information?

Just an observer of human behavior.

Here's a bit of a theory. Because of technology, the world has become a smaller place, and that has amplified the difference between those who excel at something and those who aren't quite as talented. For example, compare a singer that might have traveled from town to town in the middle ages or even as recently as 150 years ago. While they might live a better than average life compared to their patrons, their ability to far exceed was limited in scope. Today, the best can have a vast audience. While that doesn't mean that others can't also leverage the ability to capture fans world wide, it does mean that the differential between the best and the typical would likely be much larger.

We also have seen this occur in industry after industry, including one of my favorite terms "dis-inter-mediation", and wealth concentration in the winners (including the winning companies).

Another impacting factor has been the loss of the family unit. Anyone with eyes can see the results in lowered test scores, students who don't know basic math and so on. The net result has been a larger proportion of the population without the skill set to succeed in a world where automation and artificial intelligence is quickly advancing.

So, we end up with half of the population of the United States paying no income tax at all, and some of them are in jobs that are being automated away.

The money has to come from somewhere, and politicians keenly understand that those who pay nothing votes count just as much as the much fewer who pay a lot.

Yes, I am speculating...but not really pleased about where things seem to be going on a bunch of fronts.

 

[samclem]

Thanks for the interesting discussion.