Could Trump's Tax Bill Trigger A Mass Exodus From Manhattan? Goldman Seems To Think So...

New York's billionaire hedge fund managers have blazed the trail south in recent years with the likes of David Tepper, Paul Tudor Jones and Eddie Lampert all ditching the Empire State for Florida...a state which brings not only pristine beaches and year-round golf weather but also the added benefit of a 0% personal income tax rate. 

Meanwhile, as Bloomberg once again points out this morning, the decision to ditch the over-taxed states of New York, New Jersey and Connecticut will be even easier if Trump's tax plan succeeds in eliminating the state and local income tax deduction...a deduction which could cost a New Yorker making $1,000,000 a year a cool $21,000 in extra taxes.

The problem for the Connecticut hedge-fund set -- and, more broadly, for a lot of the Wall Street crowd -- is that Republican proposals in both the House and Senate would drive up taxes for many high-earners in the New York City area. By eliminating the deduction for most state and local taxes, an individual making a yearly salary of $1,000,000 -- a figure not uncommon in the financial industry -- would owe the Internal Revenue Service an additional $21,000, according to a preliminary analysis by accounting firm Marcum LLP.

 

“It would almost be irresponsible if you weren’t thinking about moving,” he said.

 

Not surprisingly, Miami is exploiting the potential tax change to woo Manhattan's most successful "millionaire, billionaire, private jet owners" (to cite Obama) as Miami's luxury real estate agents say they're having a hard time keeping up with the sudden surge in demand.

The Miami Downtown Development Authority is throwing a party next month during the annual Art Basel show, and Nitin Motwani, a real estate developer, has invited wealthy Northeasterners who’ve expressed interest in moving to the area. Because the proposed tax changes are practically begging them to relocate, Motwani expects a crowd.

 

State and local taxes, also called SALT, “can and should be a major catalyst,” said Motwani, a development authority board member. Tax reform will “certainly be something we’re highlighting” at the party, in the Perez Art Museum. “Inertia is a tough thing, but you add on another tax bill and maybe that pushes you over the edge.”

 

Jeff Miller, director of luxury sales for Brown Harris Stevens in the Miami area, said he’s fielded a half-dozen calls from clients motivated by higher taxes to step up their search for South Florida property.

 

Two clients who work at New York City financial firms have scheduled tours of a newly completed 7,000-square-foot (650-square-meter) home on the Venetian Islands, Miller said. The $22.5 million asking price buys views of Biscayne Bay and a spot to moor a yacht.

 

“Usually it’s a snowstorm that would push them to pick up the phone,” Miller said. “The tax plan has the same effect.”

So what does this mean for the overall impact on domestic migration patterns?  Well, Goldman figures that the changes currently contemplated on the Senate bill could ultimately result in 2-4% of Manhattan's top earners relocating to lower taxing jurisdictions...

The increased effective tax differential between high- and low-tax areas may increase movement from the former to the latter. Exhibit 4 shows the increase in effective tax rate differentials for a few relevant pairs of states. For instance, we estimate that the TCJA would increase the gap between the combined S&L income tax rates in New York City vs. Connecticut by about 2pp to 5-6%. States with zero income tax such as Texas and Washington would experience the largest gains in relative tax competitiveness. The simple median increase in the tax gap across the six illustrative pairs is a bit above 1.5pp.

 

For our initial analysis of the potential migration effects, we review the academic literature on taxes and mobility. The reviewed studies shown in Exhibit 5 focus on high-income earners, because the literature tends to ?nd only small tax effects among lower- and middle-income earners. The studies are mixed, but the median study suggests a 2% decline in the number of top-income earners after 3-10 years per percentage point increase in the tax rate gap. Combining this median 2% mobility estimate with the 1-2 percentage point increase in the tax gap between New York City and New Jersey/Connecticut suggests that the TCJA would eventually lower the number of top-income earners in New York City by 2-4%, for example.

...and if that's not at least somewhat concerning to legislators in Albany, Trenton and Sacramento...it should be.

Tepper, who heads Appaloosa Management, relocated to Miami Beach in 2015 from Short Hills, New Jersey. Jones kept Tudor Investment Corp. in Greenwich, Connecticut, when he moved to Palm Beach, Florida, last year. In 2012, Lampert, best known as Sears Holdings Corp.’s chief executive officer, took his hedge fund to Miami from the same tony Connecticut town.

 

State budgets feel the impact. When Tepper moved his firm to Florida, forecasters warned it could jeopardize New Jersey’s budget because the firm generated more than $100 million in state income tax. In 2013, state income tax generated by residents of seven of the wealthiest towns in Fairfield County amounted to $1.8 billion, according to the Hartford Courant, or about 9 percent of the Connecticut state budget.

 

“There is a certain amount of burying one’s head in the sand and naivete in Hartford,” Connecticut’s capital, McGuire said. “I don’t think they believe it can happen.”

Oh well, it's not as if New Jersey is teetering on the edge of solvency courtesy of a massively underfunded public pension ponzi...

Comments

Bes Mon, 11/27/2017 - 17:50 Permalink

imagine the blowback------liberals flooding the rural areaschanging the districtsbecause the R's forced them out of their homeshmmmmmthings could get interesting..........

DeadFred Pigeon Mon, 11/27/2017 - 21:30 Permalink

Look what it does to the California Bible belt. I wonder why the foothill districts are so high?Interesting, a little sleuthing on the map shows there are only four Republican districts on the Pacific. Alaska, one in Washington State, one in Orange County and one in San Diego County. The East is a right wing haven compared the the Left Coast. I knew there has been a steady migration westward "Go west, young crazy, go west!" but it was startling to see it.

In reply to by Pigeon

smallblockchevy350 Occident Mortal Mon, 11/27/2017 - 18:17 Permalink

You're forgetting how ridiculous property taxes are here in NJ. I'm paying just under 10k/year in this hellhole. The national average property taxes are 3,300/yr and I'm stuck paying about 3x that. The house isn't even that big and only on 1 acre and I'm in the middle of nowhere rural north NJ.I'm trying to move far south ASAP, but so are many people I know around here. Everybody is getting taxed to death. If you take a drive there are for-sale signs in people's yards everywhere.

In reply to by Occident Mortal

vealparm bornlastnight Mon, 11/27/2017 - 21:53 Permalink

I lived in NW Jersey too....left 9 years ago.  Was paying $10k in property taxes when I left. Now live in the mountain west in a bigger, nicer, newer house and when I moved in 9 years ago the property taxes were $2,040/year, they have gone uo to $2,680 this year. The taxes on my old NJ house are now $12k.As I am retired the state income tax really doesn't factor in, I also have no "earned" income. The key is what is your retirement income? Are you living on SS? SS + savings? IRA income? Stock/bond portfolio? Fat public pension?Trust me Jersey is ridiculous to live in as a retiree. I have saved almost $75,000 in property taxes alone in 9 years. People are nicer, awesome natural beauty, incredible national parks less than a days drive, real skiing not Vernon skiing LOL, not alot of traffic(compared to NJ), better infrastructure, much lower car insurance, sales tax about the same.My only regret, I didn't do it years earlier. Get out of your high tax states folks........there is joyous life after leaving these liberal created shit shows.

In reply to by bornlastnight

401K of Dooom FoggyWorld Tue, 11/28/2017 - 00:41 Permalink

"And to that NJ pain and sorrow, we get back less money than we send to the Federal government by about 50 percent.  Tennesse, for example, gets back $1.65 for every one of their dollars that goes to DC.  No attempt has been made to right this wrong." Uh oh folks, we have a Soros troll who is  trying to get sympathy and screw with our brains.  If your claim is true, how come California has more people on Medicare and Medicaid that the combined populations of sixteen states?  Have you ever heard about the nondiscretionary part of the Federal Budget?  Looks like this might also be a Bernie voter as well.

In reply to by FoggyWorld

prmths2 401K of Dooom Tue, 11/28/2017 - 02:04 Permalink

I would add that one should distinguish between dollars that are a giveaway and those spent on somewhat productive things such as national laboratories. New Jersey has the Plasma Physics Laboratory with a budget of $75 million. Tennessee has Oak Ridge with a budget of $1.4 billion. New Mexico is also frequently tagged as a big net recipient of federal funds, with Los Alamos and Sandia ($4.6 billion).

In reply to by 401K of Dooom

Refuse-Resist 401K of Dooom Tue, 11/28/2017 - 06:34 Permalink

I know an MD, who's very well compensated relative to the rest of us, who was a rabid Berniebro.He would say at a party "I"m a socialist".LOLI once replied "how would you feel about donating 90% of your salary to the .gov so everyone could have free college and health care, like you're touting>?"Him: Uh, that's not how it would work.Me: Who would pay?Him: the government.Me: who is the government and where to they get their money?Him: Uh, squirrel!  

In reply to by 401K of Dooom

Synoia Umh Mon, 11/27/2017 - 19:13 Permalink

Yes, and very high property taxes in the "No Income Tax" states.The trade off is amenities vs costs. You can live in rural Oklahoma. Ameanities = vist the local Walmart.There are no "cheap" states. If you are going to relocate, Costa Rica is a low cost country.

In reply to by Umh

yellensNIRPles Occident Mortal Mon, 11/27/2017 - 19:06 Permalink

Incorrect. It's another 2%, not a 2% savings as you put it. People are being separated from their money and they don't like it. The billionaires and milliioniares are the ones who have the financial ability to say 'fuck it' and leave first. The rest of us plebes have to grind it out or bail and take a huge loss during the move since even the act of leaving costs a shitload of money.Ask me how I know...

In reply to by Occident Mortal

wisehiney Mon, 11/27/2017 - 17:53 Permalink

So bye, bye Miss socialist lie.Drove my Chevy where your heavy,Taxes don't make me cry. These good ol boys,Are drinking whisky and rye.Singing, this'll be the place that I die.

thecondor Mon, 11/27/2017 - 17:53 Permalink

Just stay away from Fl.  You are not wanted here.  You made your bed up there, now fucking sleep in it.  Don't come here to the Gunshine state and start your libtard shit.  Stay out, you are not welcome. 

Refuse-Resist thecondor Tue, 11/28/2017 - 06:39 Permalink

While I agree with your sentiment, my visits to FL felt like a visit to a warm jewish/yankee retirement community writ large. Down south there's some Cubans. In the middle more yanks./jews. Only the panhandle is really southern any more.Y'all lost that battle.It must suck to be a yankee taxpayer and to know that the majority of the money you're paying to support .gov pensions is going to FL and some other southern states, albeit to a lesser extent.Talk about exploitation.  I live in NC and they'er coming here in droves too.But we're already turning into mexico so it may be too late for a yankee shitlib invasion to matter.I live in a tiny town in Appalachia, 90% white, but I still have to press 1 for English on every ATM, for example and public schools here have so many non-English speakers that we need ESL depts and bilingual county government officials. They place huge burden on everything.Migrations are disruptive to locals in many ways.I wish the mestizos would go back and the yankees would stay put in their self- made liberal hellholes.I don't need your money or your communist ideas. 

In reply to by thecondor

thecondor lester1 Mon, 11/27/2017 - 18:01 Permalink

I thought Libtards like to pay higher taxes.  I thought it was patriotic?  According to the commies on the left coast and in the N.E. more taxes is the way to go, now all of them are going to be butt hurt over this?  Is it hypocrisy, cognitive dissonance or retardation?  

In reply to by lester1

Refuse-Resist thecondor Tue, 11/28/2017 - 06:42 Permalink

Liberals are only liberal when other people are watching. They hire tax accountants to jew the system just like me.They own guns or rely on armed men in private, but in public call for confiscation. They make good money but virtue signal for communism.Until 90% of their money gets taken away, then its a problem.Our problem. No matter that most of us make less than $40k.You can't reason with them. Only mock them.

In reply to by thecondor