New York and California have always been high-tax states. However, the new tax bill may be causing a migration shakeup. High coastal taxes, primarily in NY and CA will cause residents to flee these states, according to economists.
In an article for The Wall Street Journal, conservative economists Arthur Laffer and Stephen Moore predict that a new Exodus from New York and California. They predict a net 800,000 people will move out of California and New York over the next three years.
The reason? The new federal tax law.
Under the new federal tax law, high-income earners may be facing a tax increase. The new tax law caps state and local tax (SALT) deductions at $10,000. Those who owe more than $10,000 in state and local taxes will not be able to deduct it from their federal return.
High coastal taxes have always been a problem and have caused taxpayer flight before, notably from parts of California such as the Bay Area. While most citizens can expect their taxes to go down, high-income earners will likely see their taxes go up.
This means that low, or no-tax states such as Florida are looking even better now.
Not Everyone Agrees
Other economists dismiss the prediction, citing that high coastal taxes have been a reality for a while. California and New York in particular have always been seen as high-tax states. Economist and sociologist Cristobal Young of Stanford, who co-authored the leading study on wealth and tax migration, calls the forecast “pure nonsense.”
“There is no correlation between the top tax state tax rate and the number (or rate) of millionaires in a state,” he said. He added that the people most affected by tax rates are the “late-career working rich” and they are less likely to move because they are “embedded in place for a host of social and economic reasons,” from the location of their companies and jobs to their social lives, charitable boards and customers.
Laffer and Moore aren’t so sure. They argue that 3.5 million Americans on net have moved from the highest-tax states to the lowest-tax ones. Although it should be noted that not all of these were millionaires.
People fleeing high-tax states is nothing new. Often, it is middle and lower-income residents who leave in search of a better cost of living. This is where City vs City can help!
Time To Move?
If you’re looking to flee high coastal taxes or thinking about moving to a different city, we have you covered. The City vs City app is a powerful cost of living calculator that uses real, local data to determine your city’s cost of living.
After examining after-tax income, state and local taxes, housing expenses, and more; City vs City compares your city’s cost with another city of your choosing. Stack your costs up for a side by side comparison and see which one comes out ahead.
Take a look below for a demonstration. City vs City was devised to answer one simple question. How much do you need to earn in a different city to maintain the same standard of living? This is a common question that anyone considering a move should ask.
If high coastal taxes are a problem, what if you were to pick up and move from Los Angeles to Pittsburgh, for example? Let’s find out.
For more comparisons, check out the daily match-ups on our YouTube Channel.
Wherever you’re thinking of moving, don’t make a move without downloading the City vs City app first!