7 ms·

High taxes be damned, the rich keep moving to California

54 points by spking 8y ago

gamechangr 8y ago
This has been posted a few times today... https://news.ycombinator.com/item?id=19359510 https://news.ycombinator.com/item?id=19359510
- dang 8y ago
  On HN, we don't count submissions as dupes if the story hasn't had significant attention yet. This is in the FAQ: https://news.ycombinator.com/newsfaq.html https://news.ycombinator.com/newsfaq.html. The idea is to give good stories multiple chances at attention, since otherwise the randomness in what makes it off /newest is too great.
gnicholas 8y ago
Once tax day has come and the full force of the capped SALT deduction is felt, things may change. A high-earning couple with $500k in combined income (roughly $45k in state taxes) and a $2m home (roughly $20k in local taxes) will go from a $65k deduction to a $10k deduction.
- eclipxe 8y ago
  I'm not a fan of the new tax plan, however that same couple would have been subject to AMT previously. The changes to AMT in the new tax plan offset the loss of deductions.
- esf 8y ago
  Am half of a high earning couple in a bit above this range in California. Surprisingly, my taxes changed very little this year. In years prior, I always had to pay AMT, in which SALT deductions were already disallowed. The new tax law is basically a wash. I don't pay AMT, just pay higher regular. I didn't check exactly but my effective rate this year may even have gone down a little. Many people in this income range will find similar.
  - eclipxe 8y ago
    Yep, not a fan of the tax plan but it seems like a lot of folks forget about AMT. AMT made state and local tax deductions pointless.
  - CoolGuySteve 8y ago
    I’ve been doing the same math for NYC since I work remotely. The thing is, I can still move to another state and not pay state taxes or AMT. I like NYC but I’m not sure I still like it tens of thousands of dollars much after this latest tax reform.
    - esf 8y ago
      Sure, but the status quo in California didn't really change with the new tax law for this income group, contra the comment. If the taxes didn't deter you before, they aren't different now.
  - gnicholas 8y ago
    Interesting to hear this. I used to be a high-earner (was a tax lawyer before a startup founder) in CA and never ran into the AMT. I see several folks mention the AMT below, but if no one was getting a SALT benefit before, how could the cap have been a revenue-raiser (which it was scored as) in the tax bill? I realize that the lower rates help out high earners and can mitigate the effect of the SALT cap. But all high earners across the country get the benefit of low rates, whereas only the ones in high tax states get hit with the cap. So when weighing the choice between being a relatively high earners in a low tax state or a super high earners in a high tax state, the balance shifts toward the low tax state.
    - esf 8y ago
      It's a revenue raiser because it does raise the taxes of people outside this range. Primarily people in 500k - 1m range were hitting AMT before, especially if married or with children. Don't misunderstand me: I am responding only to the parent comment that the new tax law will massively change things for a 500k couple due to deductions. For that specific range for a married couple it won't (because they likely already were paying higher taxes due to AMT). To your second point, that's also highly individual. My household income is ~800k. That makes my California effective tax rate 8.9%. I personally would have a hard time finding jobs for both my husband and myself in a new state taking only an 8.9% pay cut. The phenomenon discussed in the article of continuing net inflow of high earners to California and out flow of middle and lower earners is not new: https://www.sacbee.com/news/state/california/article136478098.html https://www.sacbee.com/news/state/california/article13647809... I am not saying this is good! But the simplistic "everyone is fleeing high CA taxes" narrative is not supported by the data. What is happening is not good for California but also more complicated than that. I would say the burden of high housing costs absolutely dwarfs the effect of taxes for most people.
- nostrademons 8y ago
  Wealthy != high income. A high-earning couple might make $500K spread across 2 W-2 salaries, and then pay those $45K in state and ~$200K in federal taxes. A wealthy couple owns a network of business, reinvests all profits of those businesses in capital improvements to make more money in the future, pulls out only enough in salary to meet their expenses, makes an equivalent donation to charity to offset all their "income", and then pays zero in taxes.
  - syspec 8y ago
    Can you explain the charity portion, isn’t that the net same as not having the money? Sincere question
    - ronyeh 8y ago
      Maybe if the charity is called "$YOUR_FAMILY_NAME Foundation" then you can save on taxes and still get to do things you enjoy, like flying your private jet to fight malaria or travel to your country club to play some golf (for charity).
      - rubicon33 8y ago
        Ok but how many people really have "$YOUR_FAMILY_NAME Foundation" and AREN'T being carefully watched by the Feds? Honestly, this thread just sounds like something pulled from someone busted on NBC's "Greed" show. Not that I am opposed to reducing one's tax burden, mind you. It's just that this doesn't sound like a feasible way of doing it.
    - nostrademons 8y ago
      You get to control where it goes, rather than the government. For most people, their values are an extension of their identity. (This, BTW, is why we get values voters on both sides of the aisle who vote against their own economic self-interest for a party that supports the kind of world they want to live in.) If you're making 2x+ times what you actually need to live the personal lifestyle you want, the rest is going to shape the world around you anyway. If you give to 501(c)3 organizations whose values happen to line up with yours (or better yet, control your own family foundation so you can set the agenda entirely), you get to write that influence off against the money that you spend on personal expenses. I've often heard of the dividing line between upper middle class and wealthy as "Upper middle class people think income. Wealthy people think control." The vast majority of a wealthy person's wealth is held in various legal fictions anyway - a network of corporations, trusts, funds, and foundations that are each separate legal entities, but are all controlled by members of their family. Who cares if the money is in your name if it's the name of an entity that you can sign for?
- docker_up 8y ago
  This is false. Most of those deductions weren't applicable with AMT anyway. My taxes actually went down significantly this year (~20k).
- kelnos 8y ago
  $24k, most likely. Unless this couple also has a lot of other possible deductions, they'll likely just opt for the new standard deduction, which is $24k if filing jointly. Still less than their previous deduction, but not as drastic a loss as you claim. And with the near-elimination of AMT, it may end up being a wash for many people in this situation.
- deleted 8y ago
  [deleted]
mario0b1 8y ago
>highest-in-the-nation 13.3% income tax rate That sounds very comfortable and affordable
- scarejunba 8y ago
  Broseph, they're paying 28% via federal as well, and social security and Medicare. If it were only 13% marginal that would be whoop-for-joy low.
  - jlrubin 8y ago
    (In case you're wondering -- you're likely being downvoted for calling the parent 'Broseph' -- it's a bit of a pejorative, which is uncalled for in HN's mostly civil discourse)
    - mav3rick 8y ago
      I thought it was funny. Why do people get upset so easily.
      - justAnotherNET 8y ago
        Lifelong exposure to petrochemical derived endocrine disruptors causing low-T, on a societal scale.
      - jlrubin 8y ago
        Don't shoot the messenger!
      - shard972 8y ago
        Yea i don't get it either, I have heard broseph used in a friendly way between mostly lower-middle class people in Australia.
        diN0bot 8y ago
        who are white men? it's weird to be called a white male name if you're not. not upsetting just presumptuous. what if people started calling you rachel in a friendly way? sure it's friend... still feels weird and out of place... and ultimately unnecessary if you're actually trying to be friendly.
heavyset_go 8y ago
It's almost as if one of the benefits of being rich is that you don't have to worry about things like how much taxes cost. Yes, this can be interpreted in more than one way.
- Gibbon1 8y ago
  My take is for truly wealthy people, there is where you live for tax purposes and where you spend your time. Those people usually also have a lot of control how they register their income. And so being wealthy really just means that paying more or less taxes is a discretionary expense. Like a lot of other discretionary life style expenses they pay. Two examples I know of. One guy who had a $200,000 RV parked in a warehouse in SF. With his office upstairs. But he didn't 'live there'. And another whose llc owns a condo by the Marina. That guy doesn't 'live there' either. Both those guys probably paying $100k/year for 'convenience' Things change radically when you where you live for tax purposes and where you spend your time are the same place. And you can't decide how you are paid. Some friends of mine, high paid working for a fortune 500 wanted to relocate them to Waco Texas. $200k goes a lot farther in Waco TX. And yeah fuck no.
alkibiades 8y ago
It defines rich as 125k. That definitely isn't rich in california. It also says there's a net migration outwards and that the middle class and poor are fleeing.
- bthornbury 8y ago
  Might be able to afford an apartment
  - m0zg 8y ago
    With a 2hr commute.
    - lsc 8y ago
      meh, if you don't have kids, $125K is plenty to live in a so so part of sunnyvale or mountain view (which is totally safe, just your apartment will be built in the '60s to working class standards, which isn't as bad as it sounds; the weather here means that having flimsy and poorly-insulated housing isn't as big of a deal as it would be otherwise.) I mean, you won't be buying right now, but you will be able to save money; if we have another big drop in housing prices, you will be all set: otherwise, you will just have to move when you retire. (which actually is pretty sad, 'cause those social connections are really important. but just saying, if you have $125K/yr, two people can live here comfortably.) If it's really important that you have a lot of room, you aren't going to like it here. Really, I think that's the big difference. My own impression is that as a sysadmin without a degree, I get like 2x here what i would other places, and yeah, housing is more than 2x, but... housing is a kinda small part of my budget. I save a lot more working here, and have access to a lot more luxuries that don't involve personal space. Honestly, if you wanted to get me to move? Probably the best thing you could promise me is a job with an office... or even just the sort of large cubicle my job role rated in the mid to late aughts. I mean, my job pays really well, the food is good and people are nice to me, and I really appreciate it, but it seems like every year my desk shrinks. I think the parking spot they reserve for the car I don't use is allocated more space than the desk where I sit all day.
edoo 8y ago
If you actually qualify as "rich" that means you have multiple estates and your primary residence is surely not in the pirate tax cove of CA.
m0zg 8y ago
People who can hire accountants who can bring down their tax rates to below those of their secretaries are moving to California. News at 11.
xacaxulu 8y ago
Yes, they keep having their estates and legal residences in Florida, Texas, etc.
- gnicholas 8y ago
  Maintaining residency outside of CA/NY/etc. isn’t as simple as pretending that a home in Texas is your primary residence. These states go after high earners and audit the number of days in/out of state, as well as drivers license, and even the location of pets. When there’s lots of tax revenue on the line, they dig up the details. Source: used to be a tax lawyer.
coldtea 8y ago
Why would the rich care about taxes? They have thousands of loopholes at their disposal to avoid them. It's all an "expense" to them...
neonate 8y ago
https://outline.com/sdH9NZ https://outline.com/sdH9NZ
snazzycalynx 8y ago
First off, making $110k a year does not make you rich. Secondly, the article does not address the rich that live in California but make their money outside of California. Many truly rich people buy homes in California even though they have a "primary residence" outside of California.
foxyv 8y ago
You have to be rich to live in California. Either that or willing to sacrifice your retirement, because saving money is nearly impossible for lower and middle class Californians. There are too many costs that come with living and working there.
- zerr 8y ago
  Do you mean the Bay Area only or the whole state?
  - HNLurker2 8y ago
    And immigrants have no chance?
squozzer 8y ago
>In fact, more wealthy people are moving to California than leaving, research indicates. It’s the poor and middle class who are departing. The LA Times must be so proud. And who will provide all the services that the sophisticated rich demand?

54 points by spking 8y ago

This has been posted a few times today... https://news.ycombinator.com/item?id=19359510 https://news.ycombinator.com/item?id=19359510

dang 8y ago
On HN, we don't count submissions as dupes if the story hasn't had significant attention yet. This is in the FAQ: https://news.ycombinator.com/newsfaq.html https://news.ycombinator.com/newsfaq.html. The idea is to give good stories multiple chances at attention, since otherwise the randomness in what makes it off /newest is too great.

gnicholas 8y ago

Once tax day has come and the full force of the capped SALT deduction is felt, things may change. A high-earning couple with $500k in combined income (roughly $45k in state taxes) and a $2m home (roughly $20k in local taxes) will go from a $65k deduction to a $10k deduction.

eclipxe 8y ago
I'm not a fan of the new tax plan, however that same couple would have been subject to AMT previously. The changes to AMT in the new tax plan offset the loss of deductions.
esf 8y ago
Am half of a high earning couple in a bit above this range in California. Surprisingly, my taxes changed very little this year. In years prior, I always had to pay AMT, in which SALT deductions were already disallowed. The new tax law is basically a wash. I don't pay AMT, just pay higher regular. I didn't check exactly but my effective rate this year may even have gone down a little. Many people in this income range will find similar.
- eclipxe 8y ago
  Yep, not a fan of the tax plan but it seems like a lot of folks forget about AMT. AMT made state and local tax deductions pointless.
- CoolGuySteve 8y ago
  I’ve been doing the same math for NYC since I work remotely. The thing is, I can still move to another state and not pay state taxes or AMT. I like NYC but I’m not sure I still like it tens of thousands of dollars much after this latest tax reform.
  - esf 8y ago
    Sure, but the status quo in California didn't really change with the new tax law for this income group, contra the comment. If the taxes didn't deter you before, they aren't different now.
- gnicholas 8y ago
  Interesting to hear this. I used to be a high-earner (was a tax lawyer before a startup founder) in CA and never ran into the AMT. I see several folks mention the AMT below, but if no one was getting a SALT benefit before, how could the cap have been a revenue-raiser (which it was scored as) in the tax bill? I realize that the lower rates help out high earners and can mitigate the effect of the SALT cap. But all high earners across the country get the benefit of low rates, whereas only the ones in high tax states get hit with the cap. So when weighing the choice between being a relatively high earners in a low tax state or a super high earners in a high tax state, the balance shifts toward the low tax state.
  - esf 8y ago
    It's a revenue raiser because it does raise the taxes of people outside this range. Primarily people in 500k - 1m range were hitting AMT before, especially if married or with children. Don't misunderstand me: I am responding only to the parent comment that the new tax law will massively change things for a 500k couple due to deductions. For that specific range for a married couple it won't (because they likely already were paying higher taxes due to AMT). To your second point, that's also highly individual. My household income is ~800k. That makes my California effective tax rate 8.9%. I personally would have a hard time finding jobs for both my husband and myself in a new state taking only an 8.9% pay cut. The phenomenon discussed in the article of continuing net inflow of high earners to California and out flow of middle and lower earners is not new: https://www.sacbee.com/news/state/california/article136478098.html https://www.sacbee.com/news/state/california/article13647809... I am not saying this is good! But the simplistic "everyone is fleeing high CA taxes" narrative is not supported by the data. What is happening is not good for California but also more complicated than that. I would say the burden of high housing costs absolutely dwarfs the effect of taxes for most people.
nostrademons 8y ago
Wealthy != high income. A high-earning couple might make $500K spread across 2 W-2 salaries, and then pay those $45K in state and ~$200K in federal taxes. A wealthy couple owns a network of business, reinvests all profits of those businesses in capital improvements to make more money in the future, pulls out only enough in salary to meet their expenses, makes an equivalent donation to charity to offset all their "income", and then pays zero in taxes.
- syspec 8y ago
  Can you explain the charity portion, isn’t that the net same as not having the money? Sincere question
  - ronyeh 8y ago
    Maybe if the charity is called "$YOUR_FAMILY_NAME Foundation" then you can save on taxes and still get to do things you enjoy, like flying your private jet to fight malaria or travel to your country club to play some golf (for charity).
    - rubicon33 8y ago
      Ok but how many people really have "$YOUR_FAMILY_NAME Foundation" and AREN'T being carefully watched by the Feds? Honestly, this thread just sounds like something pulled from someone busted on NBC's "Greed" show. Not that I am opposed to reducing one's tax burden, mind you. It's just that this doesn't sound like a feasible way of doing it.
  - nostrademons 8y ago
    You get to control where it goes, rather than the government. For most people, their values are an extension of their identity. (This, BTW, is why we get values voters on both sides of the aisle who vote against their own economic self-interest for a party that supports the kind of world they want to live in.) If you're making 2x+ times what you actually need to live the personal lifestyle you want, the rest is going to shape the world around you anyway. If you give to 501(c)3 organizations whose values happen to line up with yours (or better yet, control your own family foundation so you can set the agenda entirely), you get to write that influence off against the money that you spend on personal expenses. I've often heard of the dividing line between upper middle class and wealthy as "Upper middle class people think income. Wealthy people think control." The vast majority of a wealthy person's wealth is held in various legal fictions anyway - a network of corporations, trusts, funds, and foundations that are each separate legal entities, but are all controlled by members of their family. Who cares if the money is in your name if it's the name of an entity that you can sign for?
docker_up 8y ago
This is false. Most of those deductions weren't applicable with AMT anyway. My taxes actually went down significantly this year (~20k).
kelnos 8y ago
$24k, most likely. Unless this couple also has a lot of other possible deductions, they'll likely just opt for the new standard deduction, which is $24k if filing jointly. Still less than their previous deduction, but not as drastic a loss as you claim. And with the near-elimination of AMT, it may end up being a wash for many people in this situation.
deleted 8y ago
[deleted]

mario0b1 8y ago

>highest-in-the-nation 13.3% income tax rate That sounds very comfortable and affordable

scarejunba 8y ago
Broseph, they're paying 28% via federal as well, and social security and Medicare. If it were only 13% marginal that would be whoop-for-joy low.
- jlrubin 8y ago
  (In case you're wondering -- you're likely being downvoted for calling the parent 'Broseph' -- it's a bit of a pejorative, which is uncalled for in HN's mostly civil discourse)
  - mav3rick 8y ago
    I thought it was funny. Why do people get upset so easily.
    - justAnotherNET 8y ago
      Lifelong exposure to petrochemical derived endocrine disruptors causing low-T, on a societal scale.
    - jlrubin 8y ago
      Don't shoot the messenger!
    - shard972 8y ago
      Yea i don't get it either, I have heard broseph used in a friendly way between mostly lower-middle class people in Australia.
      - diN0bot 8y ago
        who are white men? it's weird to be called a white male name if you're not. not upsetting just presumptuous. what if people started calling you rachel in a friendly way? sure it's friend... still feels weird and out of place... and ultimately unnecessary if you're actually trying to be friendly.

heavyset_go 8y ago

It's almost as if one of the benefits of being rich is that you don't have to worry about things like how much taxes cost. Yes, this can be interpreted in more than one way.

Gibbon1 8y ago
My take is for truly wealthy people, there is where you live for tax purposes and where you spend your time. Those people usually also have a lot of control how they register their income. And so being wealthy really just means that paying more or less taxes is a discretionary expense. Like a lot of other discretionary life style expenses they pay. Two examples I know of. One guy who had a $200,000 RV parked in a warehouse in SF. With his office upstairs. But he didn't 'live there'. And another whose llc owns a condo by the Marina. That guy doesn't 'live there' either. Both those guys probably paying $100k/year for 'convenience' Things change radically when you where you live for tax purposes and where you spend your time are the same place. And you can't decide how you are paid. Some friends of mine, high paid working for a fortune 500 wanted to relocate them to Waco Texas. $200k goes a lot farther in Waco TX. And yeah fuck no.

alkibiades 8y ago

It defines rich as 125k. That definitely isn't rich in california. It also says there's a net migration outwards and that the middle class and poor are fleeing.

bthornbury 8y ago
Might be able to afford an apartment
- m0zg 8y ago
  With a 2hr commute.
  - lsc 8y ago
    meh, if you don't have kids, $125K is plenty to live in a so so part of sunnyvale or mountain view (which is totally safe, just your apartment will be built in the '60s to working class standards, which isn't as bad as it sounds; the weather here means that having flimsy and poorly-insulated housing isn't as big of a deal as it would be otherwise.) I mean, you won't be buying right now, but you will be able to save money; if we have another big drop in housing prices, you will be all set: otherwise, you will just have to move when you retire. (which actually is pretty sad, 'cause those social connections are really important. but just saying, if you have $125K/yr, two people can live here comfortably.) If it's really important that you have a lot of room, you aren't going to like it here. Really, I think that's the big difference. My own impression is that as a sysadmin without a degree, I get like 2x here what i would other places, and yeah, housing is more than 2x, but... housing is a kinda small part of my budget. I save a lot more working here, and have access to a lot more luxuries that don't involve personal space. Honestly, if you wanted to get me to move? Probably the best thing you could promise me is a job with an office... or even just the sort of large cubicle my job role rated in the mid to late aughts. I mean, my job pays really well, the food is good and people are nice to me, and I really appreciate it, but it seems like every year my desk shrinks. I think the parking spot they reserve for the car I don't use is allocated more space than the desk where I sit all day.

edoo 8y ago

If you actually qualify as "rich" that means you have multiple estates and your primary residence is surely not in the pirate tax cove of CA.

m0zg 8y ago

People who can hire accountants who can bring down their tax rates to below those of their secretaries are moving to California. News at 11.

xacaxulu 8y ago

Yes, they keep having their estates and legal residences in Florida, Texas, etc.

gnicholas 8y ago
Maintaining residency outside of CA/NY/etc. isn’t as simple as pretending that a home in Texas is your primary residence. These states go after high earners and audit the number of days in/out of state, as well as drivers license, and even the location of pets. When there’s lots of tax revenue on the line, they dig up the details. Source: used to be a tax lawyer.

coldtea 8y ago

Why would the rich care about taxes? They have thousands of loopholes at their disposal to avoid them. It's all an "expense" to them...

neonate 8y ago

https://outline.com/sdH9NZ https://outline.com/sdH9NZ

snazzycalynx 8y ago

First off, making $110k a year does not make you rich. Secondly, the article does not address the rich that live in California but make their money outside of California. Many truly rich people buy homes in California even though they have a "primary residence" outside of California.

foxyv 8y ago

You have to be rich to live in California. Either that or willing to sacrifice your retirement, because saving money is nearly impossible for lower and middle class Californians. There are too many costs that come with living and working there.

zerr 8y ago
Do you mean the Bay Area only or the whole state?
- HNLurker2 8y ago
  And immigrants have no chance?

squozzer 8y ago

>In fact, more wealthy people are moving to California than leaving, research indicates. It’s the poor and middle class who are departing. The LA Times must be so proud. And who will provide all the services that the sophisticated rich demand?