Deduction Rollback Hurts High-Tax States, But Exodus Isnt Assured

[question everything]

A key provision in the Republican tax plan could dim the appeal of living in high-tax states like New York in favor of low-tax states like Florida.

But research on the subject suggests high-tax regions won’t see a sudden or mass exodus. That’s because taxes are only one of the many factors that play into where individuals choose to live.

(snip)

While high-income individuals would have an incentive to relocate and lower their tax burden, they could have other ties to their communities that keep them in place: a working spouse, owning a home instead of renting, local clients and business contacts, ownership of a business, children enrolled in local schools and so on.

Moreover, though some high-tax urban areas might be susceptible to flight over taxes, many offer other powerful draws. Cities like New York or San Francisco, for example, are cultural centers and dynamic engines of economic growth that attract young workers to tech and finance jobs.

(snip)

Papers co-authored by Mr. Young found tax increases on high earners in New Jersey in 2004 and California in 2005 had little or no effect on how many high-earning taxpayers left those states. Nor did a 1996 tax cut on high-earning Californians spark an inflow of the wealthy.

In a broad study published last year in the American Sociological Review that analyzed data for U.S. taxpayers earning $1 million or more, Mr. Young and three co-authors concluded that “millionaire tax flight is occurring, but only at the margins of statistical and socioeconomic significance.”

https://www.wsj.com/articles/deduction-rollback-hurts-high-tax-states-but-exodus-isnt-assured-1513526894

[AJT]

1. States like Connecticut, which never recovered from 2008, will be hurt.

I am not sure how they will get out of the trap they seem to be in. Corporations leaving, high taxes, some very poor urban areas. This is really going to put a nail in their coffin.

[Cicada]

2. Home prices will fall offsetting the reduced tax savings. That reduces the incentive to leave.

Tax benefits of home ownership are built into home prices. There is basically zero tax incentive to buy a home paying mortgage and property tax which is deductible. About 100% of the tax reduction is lost because tax payers will pay more for the house. There is no tax advantage in home ownership contrary to what “everybody knows.”

[PdxSean]

3. Hell no, we wont go!

The blue-state-targeting deduction rollback will absolutely hurt like f*ck, but they’d have to drag me kicking, screaming, biting and scratching before I’d move to a red state.

Though blue states already subsidize red states, these leeches are intent on hobbling healthy, blue-state economies for purely sadistic, political reasons.

And yes, I think republicans and Putin are intentionally trying to shitcan the US economy for personal gain. The 1% will continue to stockpile money then gobble-up bargain properties and industries when the bottom drops.

At that point America will be an oligarchy on steroids.

[mercuryblues]

4. this has the potential for a double whammy

for home prices. The norm is that when interest rates rise, home prices fall. And quite frankly home prices in my area have never recovered from the recession. The KGOP has said that they are going to raise interest rates, perhaps several times next year.

I live in a highly desirable area and home prices for a house similar to my 20 year old home are starting at $20,000 less than what we paid. That is a kick in the gut and now this. We were looking to sell within the next 2 years. We might end up being stuck here because if we can't get a certain amount there is no way we can afford to move where we want to retire.

Please Donny 2 scoops, eat another big mac.

[question everything]

5. Yes, I was thinking that Trump, as a New Yorker would lose but, having an army of accountants

he will come up ahead.

Which, of course, was the main point for his Christmas gift.