Wealthy exodus to escape new tax rules worries California Democrats

Discussion in 'Politics' started by Tsing Tao, Jan 19, 2018.

  1. Tsing Tao

    Tsing Tao

    And now, we go to the other side of the country where the Left coast insists the tax plan was aimed at them, but continues to ignore that it is their high taxation in relation to other states that is driving the discussion. Always someone else's fault.

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    Wealthy exodus to escape new tax rules worries California Democrats

    BY ADAM ASHTON

    aashton@sacbee.com

    January 18, 2018 12:33 PM

    Updated January 18, 2018 03:12 PM

    The Republican-backed federal tax bill flipped the tables on a never-ending question for California politicians: Will high taxes lead the state’s wealthiest residents to flee the Golden State for the comparable tax havens of Florida, Nevada and Texas?

    Republicans reliably raise that alarm when Democrats advocate for tax increases, like the 2012 and 2016 ballot initiatives that levied a new income tax on very high-earning residents.

    But now, with the federal tax bill cutting off deductions that benefited well-off Californians, the state’s Democrats suddenly are singing the GOP song about a potential millionaire exodus.

    “People with higher incomes pay a lot more money, and some of them may be tempted to leave,” Gov. Jerry Brown said when he unveiled his 2018-19 budget proposal last week. “This was an assault by the Republicans in Congress against California.”

    That fear animates Senate President pro tem Kevin de León’s bill that would allow California residents to write off their state taxes on their federal returns as a charitable deduction, as well as other proposals that Assembly leaders have hinted they’re preparing to offer. De Leon’s bill cleared a second committee this week and is on its way to a vote on the Senate floor. Trump administration officials say it won’t pass muster with the IRS.

    Democratic state lawmakers are worried because California relies so heavily on the income taxes it collects from high earners to fund government services. The state’s wealthiest 1 percent, for instance, pay 48 percent of its income tax, and the departure of just a few families could lead to a noticeable hit to state general fund revenue.

    “It is a genuine concern and that’s why the legislatures in high-tax states are swinging into action immediately,” said Katie Pratt, a professor at Loyola Law School in Los Angeles who specializes in taxes.

    The new federal tax law poses problems for high earners in the Golden State because it caps two deductions that Californians used to limit their federal income tax liability, restricting their ability to write off mortgage interest and their state and local taxes.

    Because real estate in coastal counties is so expensive with median home prices in the nine-county Bay Area topping $768,000, the cap on mortgage interest deductions probably will bite some middle class Californians, too.

    In two reports last month, the Institute for Taxation and Economic Policy found that 11 percent of Californians would wind up with a tax increase because of the federal changes.

    Among high income brackets, about 38 percent of Californians who earn more than $877,560 – the top 1 percent – would see a tax hike. About 25 percent of Californians earning between $130,820 and $304,630, also would see a tax increase, according to the tax policy institute.

    Will the numbers add up to encourage a high-earning family to leave California?

    “The new tax law is kind of like icing on the cake for some who were thinking about moving out of the state,” said Fiona Ma, a Democrat on the tax-collecting Board of Equalization who is running for state treasurer. “If they don’t have to stay here because of work or family, it doesn’t give them a lot of incentive.”

    So far, research on the migration of wealthy Californians suggests that most very well off people are tied to their communities or businesses and do not often migrate for tax reasons.

    A 2012 study by Stanford researchers, for example, found that millionaires are mostly rooted to their locations for economic reasons. The work, “Millionaire Migration,” was based on data from the Franchise Tax Board and looked at Californians who earned more than $1 million in a year and paid a special tax for mental health services.

    The authors expanded on their report for a 2016 study that incorporated more data from other states. It found, “elites are embedded in the regions where they achieve success, and they have limited interest in moving to procure tax advantages.”

    Another 2016 study by Next 10 found that more people moved out of California to other states than immigrated to California from other parts of the country between 2007 and 2014, although the Golden State continued to attract high earners in that period.

    “Despite the rhetoric regarding California’s oppressive tax regime and its overall hostility to business, individuals coming to California are primarily concentrated in high wage occupations, which enable them to absorb the state’s high housing costs and cost of living,” the report said.

    But State Controller Betty Yee, a Democrat who was a member of the Board of Equalization when it commissioned the Stanford study, said the combination of the state’s high housing prices and the cap on mortgage interest deductions present a different problem than that report considered.

    Previously, the state income taxes on high earners only affected residents when their incomes exceeded certain thresholds. If their income depended on stock market gains or bonuses, they didn’t pay the special taxes every year.

    Now, they’ll have to budget for the changes in the federal tax law every year, and Yee said that may lead some people to make a different calculation when they decide where to live.

    “The GOP tax plan I think has a much broader impact on a cross-section of California taxpayers,” she said. “It’s a much more volatile situation.”

    Other members of the Board of Equalization, who have spent years weighing appeals from people fighting California tax bills, aren’t worried about the 1 percent leaving California because of the new tax law. They say they’re more concerned about middle and upper-middle class Californians deciding they’d be better off in another state.

    Extremely wealthy people “are not leaving,” said George Runner, a Republican member of the board. “They don’t’ have to for the same reason they have $100,000 of wine in the basement. It doesn’t affect them.”

    “What I’m concerned about is the people in the middle class, retired cops and teachers,” he said, arguing that those kinds of residents in the Central Valley and inland Southern California would benefit from the overall tax cuts in the GOP plan.

    Joseph Vranich, who leads a Riverside County business that advises people on where to locate their businesses, called the tax law “one more nail in the coffin” that would cause small- and middle-size entrepreneurs to leave California.

    Often, he said, high income taxes, high gas taxes and strict environmental regulations lead his clients to choose other states. “When you add it all together, I call it death by a thousand cuts, and this latest law is one more cut,” he said.

    Brown and Yee so far are not endorsing de León’s bill to strike back at the federal tax law.

    Both said that they need more time to` see how the changes will play out, and both have argued that the state should consider broader changes to its tax code so the general fund is less reliant on high earners having good years.

    Neither could say for sure whether they believe well-off Californians would leave, and Brown at his press conference last week contrasted his worry about a migration of successful entrepreneurs with a reminder of what brought them here in the first place.

    “California has a lot of opportunity. That’s why people are here,” he said.
     
    Tom B likes this.
  2. Arnie

    Arnie

    People flocking to low-tax states could swing future elections

    Just a month ago, as friends and families prepared to gather for the holiday season, the men and women at the U.S. Census Bureau were busy releasing their latest annual estimates of population changes across the United States.

    With the hustle and bustle of the season, many Americans missed the important new data. The new census estimates detail how states have grown since the last full census in 2010. The estimates provide some fascinating insight on what we can expect from the quickly approaching 2020 Census.

    For those of us wonky enough to follow the annual trends in state-by-state migration, the numbers were an early Christmas gift.

    A report I have authored with Arthur Laffer for the past decade, "Rich States, Poor States," has tracked this movement, as Americans “vote with their feet” across state lines. Our research provides policymakers timely data linking migration to state-level policy decisions and economic competitiveness.

    In general, states that keep taxes low and provide a competitive business climate perform far better than the states that follow the tax-and-spend approach.

    In terms of overall population changes over the past year, that finding is once again confirmed. The United States has grown to nearly 327 million residents, with highly competitive economies in Idaho, Nevada and Utah leading the way this past year in percentage growth.

    It is important to note that overall population growth takes into account several factors, including: birth rates and death rates, international immigration and domestic migration. This data provides a key barometer for policymakers as states compete for the Americans who continue to “vote with their feet” and move from state to state for greater economic opportunity.

    At least once a decade, the political class in Washington pays close attention to these state population flows, as the numbers will alter the makeup of congressional seats during the once-in-a-decade process of reapportionment and redistricting.

    Seats in the U.S. House of Representatives are apportioned based on the total number of residents within a state. There are several methods that the firm, Election Data Services, uses when attempting to estimate which states will be the big winners and losers of the 2020 Census.

    The new 2017 Census estimates can be used to give us a year-over-year change from 2016 or, alternatively, estimates can be based on a longer-trend line. The data gives a nice summary of estimates for congressional seat changes after the 2020 Census.

    [​IMG]
     
  3. Similar to the exodus out of Cook County Illinois. Property taxes are literally driving people out of their homes.
     
    DTB2 and Clubber Lang like this.
  4. gwb-trading

    gwb-trading

  5. How many times do Democrat morons have to touch a scalding hot pan before they realize they will get burned?

    You can’t fix stupid. SMH
     
  6. Buy1Sell2

    Buy1Sell2

    Yes, but they continue voting progressive wherever they go, so this is bad for Conservatives.
     
  7. Tony Stark

    Tony Stark

    Even if they leave,they will still likely vote democrat making states like AZ,FL,TX,NV,CO etc more blue :)

    The best thing for democrats is having liberals leave overwhelming blue states like CA,NY,IL etc and vote elsewhere.
     
  8. That's the plan. Bankrupt every state and call it a victory. But Trump has the mental problem?
     
  9. Tsing Tao

    Tsing Tao

    I doubt it. After seeing what drove them from California, you honestly believe they'll vote to bring the same bullshit to their new home?

    Meanwhile, you, RRY16 and other Californians who believe in "the vision" can rest easy knowing you'll be circling the toilet with the rest of the turds left over.
     
    Clubber Lang and Max E. like this.
  10. Tony Stark

    Tony Stark


    CA isn't bankrupt.Better than Republicans bankrupting the country like Reagan tripling the debt and creating massive deficits,Bush doubling the debt and turning a budget surplus into a trillion dollar deficit.Trump is on track to join them with his multi trillion dollar tax cuts and soon to be trillion dollar deficits.
     
    #10     Jan 19, 2018