No matter which country, culture, or time period, anytime someone’s total income tax rate approaches 40%, they scramble to lower it. High income earners in several states are now breaching that 40% barrier, and residents have begun taking action in 2019.
There are several high-tax state candidates, the usual suspects, such as Illinois, Connecticut, and New Jersey. But this is occurring in the largest numbers in the high-tax states of New York and California. New Yorkers are streaming into no-tax Florida and Californians are streaming into no-tax Texas. (Mansions in Florida have seen prices rise all year) For the high-income earners that are remaining where they are, they are moving billions of their investment dollars into tax-exempt bonds. This is the easiest way to reduce the tax bite until they get into more serious tax planning and moving their primary residence.
As for corporations, they have been abandoning high-tax states for several years. While California gets the most press about this, the states of Illinois and Connecticut are also facing this problem. Connecticut chased the hedge funds and trading desks back to New York City, and their insurance and banking companies to the Carolinas – even as far as Oklahoma (Oklahoma city is booming). Taxes are most everyone’s largest expense so it is critical to your financial stability and success to minimize your tax burdens. If you evaluate both your personal and business taxes, you too may be better off in a different state or jurisdiction.