Our top-heavy economy has come to this
May 2, 2016 8:49 AM Subscribe
"One man can move out of New Jersey and put the entire state budget at risk. Other states are facing similar situations as a greater share of income — and tax revenue — becomes concentrated in the hands of a few. New Jersey won’t say exactly how much the hedge-fund billionaire, David Tepper, paid in taxes. But according to Institutional Investor’s Alpha, he earned more than $6 billion from 2012 to 2015 ... [Tepper] is leaving for Florida at an especially opportune time for tax savings." (SLNYT)
The IRS offers statistics on the top 400 (Federal) individual income tax returns (PDF file). Of note, 129 individual taxpayers have appeared on the top 400 list for 10 years or more in 1992-2013 (see Table 4), and 32 of the 400 paid less than ten percent in taxes in 2012 (only 12 in 2013; see Table 3).
The IRS offers statistics on the top 400 (Federal) individual income tax returns (PDF file). Of note, 129 individual taxpayers have appeared on the top 400 list for 10 years or more in 1992-2013 (see Table 4), and 32 of the 400 paid less than ten percent in taxes in 2012 (only 12 in 2013; see Table 3).
The anecdote about a $50 million surplus in DC because a single millionaire died is sort of funny. It seems like evidence for a kind of problem, but is anyone surprised that an estate tax generates these kinds of sudden windfalls? People don't die predictably. Just think of how large the budget surplus was for the people who inherited that guy's money!
In the background is the problem of wealth inequality. But wealth inequality is roughly as bad in Scandinavia as it is in the US. To me that seems intractable.
posted by anotherpanacea at 9:03 AM on May 2, 2016 [1 favorite]
In the background is the problem of wealth inequality. But wealth inequality is roughly as bad in Scandinavia as it is in the US. To me that seems intractable.
posted by anotherpanacea at 9:03 AM on May 2, 2016 [1 favorite]
He does have family — his mother and sister — who live in Florida. But several New Jersey lawmakers cited his relocation as proof that the state’s tax rates, up from 6.37 percent in 1996, are chasing away the rich.
Yeah, I don't buy that the tax rate has any bearing at all on a billionaire moving to another state... the difference in lifestyle, income, whatever, will be zero when you effectively have all the money you could ever spend. So he's moving for purely political reasons? Or are republican lawmakers making up a political point using a guy moving to be closer to his family?
posted by Huck500 at 9:06 AM on May 2, 2016 [5 favorites]
Yeah, I don't buy that the tax rate has any bearing at all on a billionaire moving to another state... the difference in lifestyle, income, whatever, will be zero when you effectively have all the money you could ever spend. So he's moving for purely political reasons? Or are republican lawmakers making up a political point using a guy moving to be closer to his family?
posted by Huck500 at 9:06 AM on May 2, 2016 [5 favorites]
It doesn't have to be taxing the rich - any time you have your tax base concentrated in one area and that area suffers a downturn you will have the same issues. I'm sure that Texas and North Dakota, for example, are hurting because of the drop in oil revenue. California was in trouble when the dot com bubble burst, because we had been relying on capital gains taxes to an excessive degree (IIRC).
posted by It's Never Lurgi at 9:08 AM on May 2, 2016 [8 favorites]
posted by It's Never Lurgi at 9:08 AM on May 2, 2016 [8 favorites]
Yeah, I don't buy that the tax rate has any bearing at all on a billionaire moving to another state... the difference in lifestyle, income, whatever, will be zero when you effectively have all the money you could ever spend.
You don't get that much money by only wanting all the money you could ever spend. You get that much money by wanting more money than you had yesterday and/or more money than some other asshole who wants more money than he had yesterday.
posted by Etrigan at 9:13 AM on May 2, 2016 [17 favorites]
You don't get that much money by only wanting all the money you could ever spend. You get that much money by wanting more money than you had yesterday and/or more money than some other asshole who wants more money than he had yesterday.
posted by Etrigan at 9:13 AM on May 2, 2016 [17 favorites]
"he earned more than $6 billion from 2012 to 2015..."
"New Jersey...has a top tax rate of 8.97 percent...up from 6.37 percent in 1996..."
Therefore...
Mr. Tepper only got to keep $5,461,800,000 from 2012 to 2015, for an effective annual post-tax income of $1,365,450,000.
In 1996 at a tax rate of 6.37, that would have been $1,404,450,000.
So the move makes sense. He's clearly hurting.
posted by crazylegs at 9:14 AM on May 2, 2016 [4 favorites]
"New Jersey...has a top tax rate of 8.97 percent...up from 6.37 percent in 1996..."
Therefore...
Mr. Tepper only got to keep $5,461,800,000 from 2012 to 2015, for an effective annual post-tax income of $1,365,450,000.
In 1996 at a tax rate of 6.37, that would have been $1,404,450,000.
So the move makes sense. He's clearly hurting.
posted by crazylegs at 9:14 AM on May 2, 2016 [4 favorites]
I believe it has been shown that the incomes of the many high-earning individuals are quite variable year to year and thus it is not good to peg your budget too tightly to them. This must be particularly true for the tippy top earners. California has seen budget issues because of this. Makes more sense to have federal tax rates for the very rich go up and set state rates for the upper middle class higher since they are a larger segment of the overall tax base and therefore subject to less volatility.
posted by fraxil at 9:20 AM on May 2, 2016 [2 favorites]
posted by fraxil at 9:20 AM on May 2, 2016 [2 favorites]
If we're talking marginal tax rates, as is usually the case for income tax, the difference would be even less. If that 2% or whatever increase is only at the top bracket, only the income above the next lowest bracket has that additional tax levied.
posted by LionIndex at 9:20 AM on May 2, 2016
posted by LionIndex at 9:20 AM on May 2, 2016
Yeah, I don't buy that the tax rate has any bearing at all on a billionaire moving to another state... the difference in lifestyle, income, whatever, will be zero when you effectively have all the money you could ever spend.
You're thinking about this from a utilitarian viewpoint, which is admirable, but that might be incorrect. Whereas I view taxes as how I pay for civilization, I've known people who view paying taxes, at all, as effectively a personal insult or theft. They HATE HATE HATE it and it doesn't matter that they're also taking advantage of the benefits that result. So I'm prepared to believe that somebody of this mindset would move, even out of the country, to avoid paying taxes even if they had, basically, infinite money.
As for me, I wish I had a huge income tax bill because that would also mean that I have an enormous income.
posted by LastOfHisKind at 9:24 AM on May 2, 2016 [35 favorites]
You're thinking about this from a utilitarian viewpoint, which is admirable, but that might be incorrect. Whereas I view taxes as how I pay for civilization, I've known people who view paying taxes, at all, as effectively a personal insult or theft. They HATE HATE HATE it and it doesn't matter that they're also taking advantage of the benefits that result. So I'm prepared to believe that somebody of this mindset would move, even out of the country, to avoid paying taxes even if they had, basically, infinite money.
As for me, I wish I had a huge income tax bill because that would also mean that I have an enormous income.
posted by LastOfHisKind at 9:24 AM on May 2, 2016 [35 favorites]
As for me, I wish I had a huge income tax bill because that would also mean that I have an enormous income.
Seconded.
posted by gauche at 9:25 AM on May 2, 2016 [8 favorites]
Seconded.
posted by gauche at 9:25 AM on May 2, 2016 [8 favorites]
You don't get that much money by only wanting all the money you could ever spend. You get that much money by wanting more money than you had yesterday and/or more money than some other asshole who wants more money than he had yesterday.
This. If you could ever be satisfied with what you had, you would have stopped long ago. It's not as if, with a few exceptions, the professional environment is that great. It's unfortunately the way the business selects for monsters.
posted by praemunire at 9:26 AM on May 2, 2016 [7 favorites]
This. If you could ever be satisfied with what you had, you would have stopped long ago. It's not as if, with a few exceptions, the professional environment is that great. It's unfortunately the way the business selects for monsters.
posted by praemunire at 9:26 AM on May 2, 2016 [7 favorites]
Re: millionaires moving for state taxes ... This definitely affects the thinking of professional athletes when deciding to sign free-agent deals. Teams in states like Florida, Texas and Washington always have a bit of a leg up in negotiations. It doesn't always work out in their favor, because there's lots of variables. But there's a reason a lot of athletes live in Florida in the off-season, and it's not always the weather.
posted by Cool Papa Bell at 9:27 AM on May 2, 2016 [3 favorites]
posted by Cool Papa Bell at 9:27 AM on May 2, 2016 [3 favorites]
the difference in lifestyle, income, whatever, will be zero when you effectively have all the money you could ever spend
You're not thinking like a Billionaire. Very few people at that level of wealth got it because they created something cool that the world loved, like JK Rowling. Most got it because they turned they large brains towards a rapacious and unending search for money, and then more money, and then more than that. The reality that the taxes make no difference to lifestyle is completely irrelevant to the conversation for those kinds of people.
I once worked for a man who wanted to live in DC, but the taxes there were too high. So he had his residence in Texas. Once a week or so he would fly to Texas on his jet, sign some documents to prove he was there, then might go visit a steakhouse for a big lunch, and be back home in DC. Sometimes he would just stop there on the way to an event in LA or SF. Did it actually matter to his bottom line? Not at all! But he didn't get where he was by thinking about lifestyle, he got there because he thought about money and how to get it and keep it.
posted by cell divide at 9:33 AM on May 2, 2016 [14 favorites]
You're not thinking like a Billionaire. Very few people at that level of wealth got it because they created something cool that the world loved, like JK Rowling. Most got it because they turned they large brains towards a rapacious and unending search for money, and then more money, and then more than that. The reality that the taxes make no difference to lifestyle is completely irrelevant to the conversation for those kinds of people.
I once worked for a man who wanted to live in DC, but the taxes there were too high. So he had his residence in Texas. Once a week or so he would fly to Texas on his jet, sign some documents to prove he was there, then might go visit a steakhouse for a big lunch, and be back home in DC. Sometimes he would just stop there on the way to an event in LA or SF. Did it actually matter to his bottom line? Not at all! But he didn't get where he was by thinking about lifestyle, he got there because he thought about money and how to get it and keep it.
posted by cell divide at 9:33 AM on May 2, 2016 [14 favorites]
It's not just billionaires. When deciding where to settle, I decided against New York, even though most of my friends and family are there, in part because we were being taxed heavily for living in NYC/NY and didn't want to be. When looking at states to relocate to, income tax was absolutely on our list of important features.
posted by corb at 9:41 AM on May 2, 2016 [1 favorite]
posted by corb at 9:41 AM on May 2, 2016 [1 favorite]
We can have a National Revenue League! States can compete with each other to assembly rosters of exceptionally wealthy individuals to maximize projectable revenue streams. Based on this we can spin up a cottage industry of Fantasy Revenue Leagues and derive second-order revenue via fees less the minimum level of prizes required to get people to start betting.
Because, while the realization that this is a knock-on effect of wealth concentration is making me sad, I'm trying to find some positive to take from this.
posted by Fezboy! at 9:42 AM on May 2, 2016 [5 favorites]
Because, while the realization that this is a knock-on effect of wealth concentration is making me sad, I'm trying to find some positive to take from this.
posted by Fezboy! at 9:42 AM on May 2, 2016 [5 favorites]
Bit suprised any of these fuckers pay any tax.
posted by Artw at 9:46 AM on May 2, 2016 [14 favorites]
posted by Artw at 9:46 AM on May 2, 2016 [14 favorites]
I think everyone benefits when states compete for residents, not just billionaires. I agree some of the residency loopholes aren't ideal, but I think that most of them should close as data collection improves. We're living in a small window of time when someone can use technology to produce receipts in a state from another without both states having access to all of their receipts.
posted by michaelh at 9:48 AM on May 2, 2016
posted by michaelh at 9:48 AM on May 2, 2016
"You can save millions a year by moving to Florida. How can you blame him?"Umm... you can blame him if your morality involves anything more than "I got mine".
On the other hand, he's a hedge fund manager. He's probably skimming money from a whole lot of people in a whole lot of places all over the world, and bringing that money to New Jersey. In a just (if impractical) world, he'd be paying taxes back to all those places, not just to New Jersey.
posted by clawsoon at 9:52 AM on May 2, 2016 [11 favorites]
Well obviously the answer is to take his billions before he gets a chance to abscond with them. Step up your game, New Jersey!
posted by Pope Guilty at 9:57 AM on May 2, 2016 [5 favorites]
posted by Pope Guilty at 9:57 AM on May 2, 2016 [5 favorites]
Meanwhile, across the Hudson, 50 Millionaires Beg New York State to Raise Their Taxes
Some more state tax reading and charts:
How do state and local individual income taxes work?
Each state's income tax brackets for 2016.
State and Local Individual Income Tax Collections Per Capita
Where Do Americans Take Their Retirement Income?
The Relative Value of $100 in Each State
Total State and Local Revenues and Expenditures, by Function
The Relationship Between Taxes and Growth at the State Level:
Some more state tax reading and charts:
How do state and local individual income taxes work?
Each state's income tax brackets for 2016.
State and Local Individual Income Tax Collections Per Capita
Where Do Americans Take Their Retirement Income?
The Relative Value of $100 in Each State
Total State and Local Revenues and Expenditures, by Function
The Relationship Between Taxes and Growth at the State Level:
...we find that neither tax revenues nor top income tax rates bear stable relationships to economic growth or employment across states and over time. While the rate of firm formation is nega-tively affected by top income tax rates, the effects are small in economic terms. Our results are inconsistent with the view that cuts in top state income tax rates will automatically or necessarily generate growth.posted by melissasaurus at 10:05 AM on May 2, 2016 [6 favorites]
It's not just billionaires. When deciding where to settle, I decided against New York, even though most of my friends and family are there, in part because we were being taxed heavily for living in NYC/NY and didn't want to be. When looking at states to relocate to, income tax was absolutely on our list of important features.
I think that's different from Tepper and other wealthy people, though. For Tepper, he lived in NJ for more than 20 years, he's 58 -- at the age where people (even very wealthy people) are thinking about retiring -- and his mother lives in Florida. I seriously doubt he's moving because of taxes. For others, tons and tons and tons of wealthy people choose to live in northern NJ and Westchester, NY -- only wealthy people can afford the incredibly expensive house prices, very high property taxes and very high income taxes. Sure, high income taxes are a visceral turn off for anyone, but once you reach a certain level of income and wealth, it's just not going to be as important as it would be for other people.
posted by odin53 at 10:08 AM on May 2, 2016 [4 favorites]
I think that's different from Tepper and other wealthy people, though. For Tepper, he lived in NJ for more than 20 years, he's 58 -- at the age where people (even very wealthy people) are thinking about retiring -- and his mother lives in Florida. I seriously doubt he's moving because of taxes. For others, tons and tons and tons of wealthy people choose to live in northern NJ and Westchester, NY -- only wealthy people can afford the incredibly expensive house prices, very high property taxes and very high income taxes. Sure, high income taxes are a visceral turn off for anyone, but once you reach a certain level of income and wealth, it's just not going to be as important as it would be for other people.
posted by odin53 at 10:08 AM on May 2, 2016 [4 favorites]
For some perspective, this guy made $6,000,000,000 over 4 years.
That's a completely batshit crazy amount of money to earn in that timespan. It's more than 0.3% of the state GDP over that period.
It's $667 per person in New Jersey. $19 per person in the US.
New Jersey's tax rate is not the problem here, but it's almost definitely going to take the blame.
posted by schmod at 10:17 AM on May 2, 2016 [18 favorites]
That's a completely batshit crazy amount of money to earn in that timespan. It's more than 0.3% of the state GDP over that period.
It's $667 per person in New Jersey. $19 per person in the US.
New Jersey's tax rate is not the problem here, but it's almost definitely going to take the blame.
posted by schmod at 10:17 AM on May 2, 2016 [18 favorites]
For Tepper, he lived in NJ for more than 20 years, he's 58 -- at the age where people (even very wealthy people) are thinking about retiring -- and his mother lives in Florida. I seriously doubt he's moving because of taxes.
I seriously doubt Tepper is "moving" at all, in the way that you or I think of it. He can wake up in Florida and be in New Jersey by the opening bell at the NYSE, work a full day and be back in Florida by nightfall.
Sure, high income taxes are a visceral turn off for anyone, but once you reach a certain level of income and wealth, it's just not going to be as important as it would be for other people.
He stands to save millions of dollars. Just because he's a billionaire doesn't mean he'd rather not make a few million more if it just means he spends more time in his private plane.
posted by Etrigan at 10:21 AM on May 2, 2016 [1 favorite]
I seriously doubt Tepper is "moving" at all, in the way that you or I think of it. He can wake up in Florida and be in New Jersey by the opening bell at the NYSE, work a full day and be back in Florida by nightfall.
Sure, high income taxes are a visceral turn off for anyone, but once you reach a certain level of income and wealth, it's just not going to be as important as it would be for other people.
He stands to save millions of dollars. Just because he's a billionaire doesn't mean he'd rather not make a few million more if it just means he spends more time in his private plane.
posted by Etrigan at 10:21 AM on May 2, 2016 [1 favorite]
This is why progressive taxation belongs at the federal level, and flatter taxation, even regressive if need be, belongs at the municipal and county levels.
posted by ocschwar at 10:24 AM on May 2, 2016 [2 favorites]
posted by ocschwar at 10:24 AM on May 2, 2016 [2 favorites]
Wait, how do we know this guy even moved to Florida?
Maine's asshole governor Paul LePage once claimed in his radio address that the state urgently needed to get rid of it's income tax because wealthy people like Stephen King were fleeing the state. Except Stephen King still lives in Maine, and is glad to pay Maine taxes.
posted by RonButNotStupid at 10:26 AM on May 2, 2016 [5 favorites]
Maine's asshole governor Paul LePage once claimed in his radio address that the state urgently needed to get rid of it's income tax because wealthy people like Stephen King were fleeing the state. Except Stephen King still lives in Maine, and is glad to pay Maine taxes.
posted by RonButNotStupid at 10:26 AM on May 2, 2016 [5 favorites]
The real problem here is differing state tax jurisdictions. Florida is notorious for this; Palm Beach high society is largely fueled by New Yorkers, etc who live in Florida 6 months and 1 day a year to get favorable tax treatment. I also know several people from the Google IPO who left California in part to avoid California income tax. (All legally, I quickly add, they truly left the state.)
It's not quite as bad as corporations avoiding US income tax by creating fake business arrangements in well known tax havens like Ireland and the Netherlands. It's pretty hard for an individual to fake moving out of state and the state income tax departments are quite aggressive in pursuing people it thinks are cheating. There are meticulous ways to document your state of residency; property ownership, school for the kids, restaurant receipts, etc.
The alternative is to tax people in the state where they originally make the money, rather than where they live when they recognize the income. That's very hard to do correctly and AFAIK the states don't try (although New York City does). The equivalent process of trying to tax corporate income in the country of origin is a global failure.
posted by Nelson at 10:29 AM on May 2, 2016 [5 favorites]
It's not quite as bad as corporations avoiding US income tax by creating fake business arrangements in well known tax havens like Ireland and the Netherlands. It's pretty hard for an individual to fake moving out of state and the state income tax departments are quite aggressive in pursuing people it thinks are cheating. There are meticulous ways to document your state of residency; property ownership, school for the kids, restaurant receipts, etc.
The alternative is to tax people in the state where they originally make the money, rather than where they live when they recognize the income. That's very hard to do correctly and AFAIK the states don't try (although New York City does). The equivalent process of trying to tax corporate income in the country of origin is a global failure.
posted by Nelson at 10:29 AM on May 2, 2016 [5 favorites]
Given the possible DC counter-example, it seems like the obvious solution to state funding problems would be to simply kill a couple billionaires and reap the windfall.
posted by aramaic at 10:34 AM on May 2, 2016 [5 favorites]
posted by aramaic at 10:34 AM on May 2, 2016 [5 favorites]
When looking at states to relocate to, income tax was absolutely on our list of important features.
I admit to being pleasantly surprised when I moved from California to Washington and discovered no income tax. I moved for family and career, and the income tax issue was an added bonus that I'm now rather uncomfortable about. For all the talk of progressiveness in Seattle and Olympia, the lack of a state income tax is a decidedly regressive move. It's pretty telling when the state supreme court holds the entire legislature in contempt for failing to fully fund schools, as is their mandate, not to mention the disaster that is transit.
posted by Existential Dread at 10:36 AM on May 2, 2016 [6 favorites]
I admit to being pleasantly surprised when I moved from California to Washington and discovered no income tax. I moved for family and career, and the income tax issue was an added bonus that I'm now rather uncomfortable about. For all the talk of progressiveness in Seattle and Olympia, the lack of a state income tax is a decidedly regressive move. It's pretty telling when the state supreme court holds the entire legislature in contempt for failing to fully fund schools, as is their mandate, not to mention the disaster that is transit.
posted by Existential Dread at 10:36 AM on May 2, 2016 [6 favorites]
the obvious solution to state funding problems would be to simply kill a couple billionaires and reap the windfall.
Don't think of it as a tax on capital gains. Think of it as insurance against guillotines.
posted by anotherpanacea at 10:39 AM on May 2, 2016 [15 favorites]
Don't think of it as a tax on capital gains. Think of it as insurance against guillotines.
posted by anotherpanacea at 10:39 AM on May 2, 2016 [15 favorites]
King certainly was big of Florida and setting everything in Florida for a year or so, so I guess he spent time there for a bit?
posted by Artw at 10:39 AM on May 2, 2016
posted by Artw at 10:39 AM on May 2, 2016
When looking at states to relocate to, income tax was absolutely on our list of important features.
I did, too. Hey, Washington! I get a 10 percent bump in my salary! But then the sales tax is higher and there's no roads...
But the opposite is California. Big income tax and poor services (relatively speaking; the state's financial picture has gotten much better in the last 10 years).
So, forget the billionaire. He's the definition of an outlier. The real question is, do you have a good government that taxes and spends effectively? In the California example, the state went batshit insane under Gray Davis and then Arnold Schwarzenegger, and still hasn't solved its crazy legislature problem, but under Jerry Brown, it's been better. Good government matters more than discussions of how you tax.
posted by Cool Papa Bell at 10:53 AM on May 2, 2016 [2 favorites]
I did, too. Hey, Washington! I get a 10 percent bump in my salary! But then the sales tax is higher and there's no roads...
But the opposite is California. Big income tax and poor services (relatively speaking; the state's financial picture has gotten much better in the last 10 years).
So, forget the billionaire. He's the definition of an outlier. The real question is, do you have a good government that taxes and spends effectively? In the California example, the state went batshit insane under Gray Davis and then Arnold Schwarzenegger, and still hasn't solved its crazy legislature problem, but under Jerry Brown, it's been better. Good government matters more than discussions of how you tax.
posted by Cool Papa Bell at 10:53 AM on May 2, 2016 [2 favorites]
odin53: I seriously doubt he's moving because of taxes.
I was debating whether to leave this after the fold or put in the IRS tables, and I went with the IRS tables:
Tepper is leaving for Florida at an especially opportune time for tax savings. Many hedge fund managers have for years used a tax loophole that allowed them to defer taxes on fees they earned through the use of offshore funds. A 2008 federal tax rule, however, requires them to declare those fees by the end of 2017 and pay any necessary federal, state and local taxes. For some hedge fund managers, the amounts declared will probably be in the billions of dollars, accountants say. A spokesman for Mr. Tepper declined to comment on his overseas income. By moving to Florida, Mr. Tepper could avoid paying state income taxes on any such funds.
So he might not be moving *because* of taxes, sure, but it's going to save him a big chunk of change in avoided NJ taxes.
(Actually, could he "move", declare and repatriate, and then move back to NJ after that? If I had to spend 27 weeks in Florida to save a few hundred million dollars, I'm sure I could make that sacrifice...)
posted by RedOrGreen at 10:54 AM on May 2, 2016 [1 favorite]
I was debating whether to leave this after the fold or put in the IRS tables, and I went with the IRS tables:
Tepper is leaving for Florida at an especially opportune time for tax savings. Many hedge fund managers have for years used a tax loophole that allowed them to defer taxes on fees they earned through the use of offshore funds. A 2008 federal tax rule, however, requires them to declare those fees by the end of 2017 and pay any necessary federal, state and local taxes. For some hedge fund managers, the amounts declared will probably be in the billions of dollars, accountants say. A spokesman for Mr. Tepper declined to comment on his overseas income. By moving to Florida, Mr. Tepper could avoid paying state income taxes on any such funds.
So he might not be moving *because* of taxes, sure, but it's going to save him a big chunk of change in avoided NJ taxes.
(Actually, could he "move", declare and repatriate, and then move back to NJ after that? If I had to spend 27 weeks in Florida to save a few hundred million dollars, I'm sure I could make that sacrifice...)
posted by RedOrGreen at 10:54 AM on May 2, 2016 [1 favorite]
We really need some nice economic terrorism laws.
posted by underflow at 10:59 AM on May 2, 2016 [4 favorites]
posted by underflow at 10:59 AM on May 2, 2016 [4 favorites]
under Jerry Brown, it's been better
Jello Biafra must be spinning in his grave. (Jello Biafra is still alive, but I'm assuming that he sleeps in a grave for the purposes of this derail.)
posted by tobascodagama at 11:08 AM on May 2, 2016 [13 favorites]
Jello Biafra must be spinning in his grave. (Jello Biafra is still alive, but I'm assuming that he sleeps in a grave for the purposes of this derail.)
posted by tobascodagama at 11:08 AM on May 2, 2016 [13 favorites]
I had read that he was moving to be close to his aging mother. NJ is among the most highly taxed states in the nation. He was paying a hefty tax, yearly. The casinos,which were to help NJ, seem no longer able to do that now that neighboring states have opened their own casinos.
What is amusing about this post is that those on the left often complain that the wealthy do not pay their fair share. Here the argument is that his fair share is going elsewhere and that is the problem.
posted by Postroad at 11:10 AM on May 2, 2016
What is amusing about this post is that those on the left often complain that the wealthy do not pay their fair share. Here the argument is that his fair share is going elsewhere and that is the problem.
posted by Postroad at 11:10 AM on May 2, 2016
Actually, could he "move", declare and repatriate, and then move back to NJ after that?
He could, but NJ would probably audit him and say that he didn't intend to establish residency in FL so he remains an NJ resident.
The tax code change they're talking about is 457A - offshore deferred compensation arrangements.
[NY focused, but informative] 10 Questions on Deferred Management Fees for Hedge Fund Managers in 2017 (by Tim Noonan, a top state tax lawyer):
4. Is it possible to move to Florida and avoid this issue?
It might not be that simple. Whenever considering a move to Florida, taxpayers must be careful about state residency rules, especially if the state the taxpayer is trying to leave is New York. Despite what many taxpayers think, it is not as simple as simply spending a certain amount of time out of New York and getting a driver’s license somewhere else. (See more details on New York residency issues.) But suffice to say, changing residency is a complex process and taxpayers have to make sure they are closely following New York’s rules. The New York Tax Department is one of the most sophisticated and aggressive enforcement agencies in the country, especially in the area of residency.
5. Even if taxpayers move to Florida and really establish residency there, could the income that they receive in a couple of years still be taxed in New York?
Maybe. Certainly New York City resident taxes can be avoided with a move, since the city tax only applies to residents. But on the state tax side, the issue really is one of income allocation. Nonresidents of New York (or whatever other state they happen to be moving from) can still be taxed on income received from sources within the state. So, the question is going to be whether or not this deferred income, when received in 2017, could be said to have a “source” in New York.
6. How would such sourcing analysis work?
In all likelihood, the income will flow through to the investment manager through a partnership, so CPAs have to have a sense of the partnership apportionment rules.* Under current New York rules, for example, a partnership would apportion income on a “by the books” method or based on a typical three-factor method of property, payroll, and sales. So if a taxpayer moves with the fund to another state like Florida and the fund continues to operate in the though 2017, the entity’s New York State allocation percentage could be quite low.
*Apportionment is a very complex area - each state has its own apportionment rules; there is no consistent standard (though SCOTUS could be taking on a case next term that could change that).
posted by melissasaurus at 11:13 AM on May 2, 2016 [2 favorites]
He could, but NJ would probably audit him and say that he didn't intend to establish residency in FL so he remains an NJ resident.
The tax code change they're talking about is 457A - offshore deferred compensation arrangements.
[NY focused, but informative] 10 Questions on Deferred Management Fees for Hedge Fund Managers in 2017 (by Tim Noonan, a top state tax lawyer):
4. Is it possible to move to Florida and avoid this issue?
It might not be that simple. Whenever considering a move to Florida, taxpayers must be careful about state residency rules, especially if the state the taxpayer is trying to leave is New York. Despite what many taxpayers think, it is not as simple as simply spending a certain amount of time out of New York and getting a driver’s license somewhere else. (See more details on New York residency issues.) But suffice to say, changing residency is a complex process and taxpayers have to make sure they are closely following New York’s rules. The New York Tax Department is one of the most sophisticated and aggressive enforcement agencies in the country, especially in the area of residency.
5. Even if taxpayers move to Florida and really establish residency there, could the income that they receive in a couple of years still be taxed in New York?
Maybe. Certainly New York City resident taxes can be avoided with a move, since the city tax only applies to residents. But on the state tax side, the issue really is one of income allocation. Nonresidents of New York (or whatever other state they happen to be moving from) can still be taxed on income received from sources within the state. So, the question is going to be whether or not this deferred income, when received in 2017, could be said to have a “source” in New York.
6. How would such sourcing analysis work?
In all likelihood, the income will flow through to the investment manager through a partnership, so CPAs have to have a sense of the partnership apportionment rules.* Under current New York rules, for example, a partnership would apportion income on a “by the books” method or based on a typical three-factor method of property, payroll, and sales. So if a taxpayer moves with the fund to another state like Florida and the fund continues to operate in the though 2017, the entity’s New York State allocation percentage could be quite low.
*Apportionment is a very complex area - each state has its own apportionment rules; there is no consistent standard (though SCOTUS could be taking on a case next term that could change that).
posted by melissasaurus at 11:13 AM on May 2, 2016 [2 favorites]
Concentrated wealth (and power) of this magnitude is a societal evil. Billionaires as a class are a societal disease. I think of these individuals as the human/individual manifestation of a black hole, rather than the fountains of life that most media in this country tells us they are. That said, I hope that I'm completely wrong about this because it seems as though more and more billionaires are being "created" each year...
posted by nikoniko at 11:16 AM on May 2, 2016 [12 favorites]
posted by nikoniko at 11:16 AM on May 2, 2016 [12 favorites]
People don't die predictably.
ok, but don't say that in front of an actuary, they're real sensitive about this subject for some reason.
posted by indubitable at 11:33 AM on May 2, 2016 [6 favorites]
ok, but don't say that in front of an actuary, they're real sensitive about this subject for some reason.
posted by indubitable at 11:33 AM on May 2, 2016 [6 favorites]
Etrigan: "He stands to save millions of dollars. Just because he's a billionaire doesn't mean he'd rather not make a few million more if it just means he spends more time in his private plane."
Geez If I had a billion dollars you wouldn't find me commuting, even by private plane, for less than another billion. I mean I'd build a dental/medical complex on my property just so my dentist and doctor could come to me.
posted by Mitheral at 11:42 AM on May 2, 2016 [3 favorites]
Geez If I had a billion dollars you wouldn't find me commuting, even by private plane, for less than another billion. I mean I'd build a dental/medical complex on my property just so my dentist and doctor could come to me.
posted by Mitheral at 11:42 AM on May 2, 2016 [3 favorites]
A person doesn't die predictably but groups of people kind of do.
However, the group of rich billionaire people is actually probably too small of a group to have predictable deaths.
posted by LizBoBiz at 11:43 AM on May 2, 2016 [4 favorites]
However, the group of rich billionaire people is actually probably too small of a group to have predictable deaths.
posted by LizBoBiz at 11:43 AM on May 2, 2016 [4 favorites]
Too Rich to Live?
Legacy for One Billionaire: Death, but No Taxes
Some Contemplate Dying In 2010 To Avoid Paying Estate Tax
Will 'Fiscal Cliff' Accelerate Millionaire Deaths?
538: A Good Time To Die?
Dying to Save Taxes: Evidence From Estate-Tax Returns on the Death Elasticity [PDF]
Legacy for One Billionaire: Death, but No Taxes
Some Contemplate Dying In 2010 To Avoid Paying Estate Tax
Will 'Fiscal Cliff' Accelerate Millionaire Deaths?
538: A Good Time To Die?
Dying to Save Taxes: Evidence From Estate-Tax Returns on the Death Elasticity [PDF]
There is abundant evidence that some people will themselves to survive in order to live through a momentous event. Evidence from estate-tax retums suggests that some people will themselves to survive a bit longer if it will enrich their heirs. To be sure, the evidence is not overwhelming. Nevertheless, our central estimate is that, for individuals dying within two weeks of a tax reform, a $10,000 potential tax saving (using 2000 dollars) increases the probability of dying in the lower-tax regime by 1.6%.posted by melissasaurus at 11:56 AM on May 2, 2016 [6 favorites]
For all the talk of progressiveness in Seattle and Olympia, the lack of a state income tax is a decidedly regressive move.
Yeah. I feel the same way about Massachusetts' lack of a graduated state income tax. Fortunately that might be remedied soon, but since it will take an amendment to the constitution, I'm not holding my breath.
posted by RonButNotStupid at 12:46 PM on May 2, 2016 [2 favorites]
Yeah. I feel the same way about Massachusetts' lack of a graduated state income tax. Fortunately that might be remedied soon, but since it will take an amendment to the constitution, I'm not holding my breath.
posted by RonButNotStupid at 12:46 PM on May 2, 2016 [2 favorites]
What is amusing about this post is that those on the left often complain that the wealthy do not pay their fair share. Here the argument is that his fair share is going elsewhere and that is the problem.
1) Florida has no state income tax, so if you wanted to make this about a guy not paying his fair share, it wouldn't be off-topic.
2) The problem as framed in the original post is not about paying or not paying but about the absurdity of one individual's decision to move -- whether for tax evasion reasons or not -- actually having serious implications for the state budget.
Point 2 feeds quite well into complaints by "the left" about income inequality. So if you're trying to make some dumb "liberals don't know WHAT they want" point, then you can just go shove it.
posted by tobascodagama at 1:13 PM on May 2, 2016 [5 favorites]
1) Florida has no state income tax, so if you wanted to make this about a guy not paying his fair share, it wouldn't be off-topic.
2) The problem as framed in the original post is not about paying or not paying but about the absurdity of one individual's decision to move -- whether for tax evasion reasons or not -- actually having serious implications for the state budget.
Point 2 feeds quite well into complaints by "the left" about income inequality. So if you're trying to make some dumb "liberals don't know WHAT they want" point, then you can just go shove it.
posted by tobascodagama at 1:13 PM on May 2, 2016 [5 favorites]
The lesser rich do sometimes move primarily for income tax purposes, but that is because it is significant to the guy or gal who is comfortably in the top 1%, but not top 0.1% material in a way it isn't to even richer people.
One of my clients built a ridiculously nice house in a no-income-tax state and moved there because it was far cheaper than paying state income tax on the money he was getting from the sale of one of his businesses. The thing that really threw him over the edge, though, wasn't the money itself, it was the idea of giving it to a state that had recently become controlled by the nutjob wing of the Republican Party. I think he found it a lot easier to stomach the tax burden when it was being spent by people of his own political persuasion.
Spend a million, that you get back later when the house is sold, to save 3 million, why not? When your usual income is half a million to a million a year, that's a huge chunk.
All those numbers seem ridiculous to me, but when you're talking about tax savings equivalent to your usual annual income, I have a really hard time faulting anyone for making that choice. It's much easier for me to fault people who are avoiding tax that amounts to less than 10% of their normal annual haul.
posted by wierdo at 1:33 PM on May 2, 2016 [4 favorites]
One of my clients built a ridiculously nice house in a no-income-tax state and moved there because it was far cheaper than paying state income tax on the money he was getting from the sale of one of his businesses. The thing that really threw him over the edge, though, wasn't the money itself, it was the idea of giving it to a state that had recently become controlled by the nutjob wing of the Republican Party. I think he found it a lot easier to stomach the tax burden when it was being spent by people of his own political persuasion.
Spend a million, that you get back later when the house is sold, to save 3 million, why not? When your usual income is half a million to a million a year, that's a huge chunk.
All those numbers seem ridiculous to me, but when you're talking about tax savings equivalent to your usual annual income, I have a really hard time faulting anyone for making that choice. It's much easier for me to fault people who are avoiding tax that amounts to less than 10% of their normal annual haul.
posted by wierdo at 1:33 PM on May 2, 2016 [4 favorites]
New Jersey and Maryland have both an estate tax and and inheritance tax.
Most states have neither.
Mr. Tepper has a wife and three children.
posted by IndigoJones at 5:13 PM on May 2, 2016 [3 favorites]
Most states have neither.
Mr. Tepper has a wife and three children.
posted by IndigoJones at 5:13 PM on May 2, 2016 [3 favorites]
Ask not what your country can do for you, ask what you can do for .001% of your country.
posted by srboisvert at 9:57 AM on May 3, 2016 [4 favorites]
posted by srboisvert at 9:57 AM on May 3, 2016 [4 favorites]
Ask not what your country can do for you, ask what you can do for .001% of your country.
Florida is still part of the United States. For now, at least.
posted by IndigoJones at 11:40 AM on May 3, 2016
Florida is still part of the United States. For now, at least.
posted by IndigoJones at 11:40 AM on May 3, 2016
I'm sure the US will still claim the whole thing for territorial purposes long after sea level rise converts the whole peninsula into a mere navigational hazard on nautical charts.
posted by tobascodagama at 5:09 PM on May 3, 2016 [1 favorite]
posted by tobascodagama at 5:09 PM on May 3, 2016 [1 favorite]
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