(Bloomberg) – Some of the hardest evidence suggests that the 2017 Republican tax law is pushing money and people out of highly taxed states like New York and New Jersey into low-tax states like Florida.
In 2018, countries with lower and lower taxes generated $ 32 billion in adjusted gross income higher than countries with higher taxes, according to an analysis of income migration data from Bank of America Global Research. Net income – nearly $ 2 billion more than in 2017 – has been almost twice the average over the past 13 years. The Republican overhaul has limited state and local deductions to $ 10,000, making it more difficult for people to shield as much income as possible from taxes.
At the same time, more and more people are moving there in states like Florida and Texas, which have no income tax. New York, California, Connecticut, and New Jersey – the states with the highest average SALT deductions lost approximately 455,000 people between July 1, 2018 and July 1, 2019, compared to 408,500 the previous year, according to the US Census. Most of the increase came from people who had left California.
“This would at least mean that people are sensitive to major changes in federal tax policy,” said Ian Rogow, a local strategist at Bank of America, who analyzed the data.
Almost half of the income taxes paid to California, New York and New Jersey come from the richest 1% of households. If they were moving in sufficient numbers, these countries could get into trouble. So far, however, the federal tax revision – which broadened the tax base – and steady economic growth as a whole have led to higher government tax revenues. According to the Census Bureau, states generated $ 327.7 billion in income tax revenue in the first three quarters of 2019, 6% more than in the same period in 2018.
Of course, people move for a variety of reasons: jobs, housing costs, and the weather among them. Despite the third highest income tax rate, Oregon was the second most popular moving destination in the United States, according to the United Van Lines Annual Movers Study. The survey found that changing jobs and retiring were the two main reasons for moving out of the northeast.
Related: Florida, Trump’s new home, leads the U.S. in money migration
The 2017 Republican tax law has limited the SALT deduction as a way to pay $ 1.5 trillion in corporate and personal income tax cuts. Governors in democratically-run states most affected by the new border, including New York and New Jersey, accused the Republicans of paying for the cut. In October, a federal judge ruled against New York, New Jersey, Connecticut and Maryland who had sued the Constitution. The states are appealing.
The SALT limit significantly increased effective taxes for wealthy residents of the blue states. In 2017, approximately 140,000 tax investigators with adjusted gross income of $ 200,000 or more paid state and local income taxes in Manhattan, or an average of $ 150,000, according to IRS. About 83,000 of these actors paid an average of $ 25,000 in property taxes. In Westchester, home to the country’s highest property taxes, the richest people paid an average of $ 65,000 in state and local income taxes and $ 28,000 in property taxes.
In the fourth quarter of 2019, Westchester homeowners cut an average of 4.1% of their last asking price to sell their homes, according to a report last week, a sign that sellers need to cut prices to attract buyers. The price cuts were the highest since the end of 2014 for a period of three months, according to a report by expert Miller Samuel Inc. and broker Douglas Elliman Real Estate.
New York governor Andrew Cuomo, who described the SALT limits as “politically devilish”, warned that limiting the deduction encourages high-income New Yorkers to leave.
“Tax the rich, tax the rich, tax the rich. We made. Well, God forbid vacation for the rich, ”said Cuomo last year.
– With the support of Oshrat Carmiel.
Contact the reporter about this story: Martin Z. Braun in New York at [email protected]
Contact the editors responsible for this story: Elizabeth Campbell at [email protected], Michael B. Marois, William Selway
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