New York taxes have always been pretty high. However, some economists have feared that high taxes and the new federal tax law will cause residents to flee. Is it happening yet?
The mass exodus of New York taxpayers may have already begun according to Bloomberg News. Previously it had been feared that changes to the federal tax law might cause some premature flight from high-tax states.
Why? While the new federal tax law cuts federal income tax it also caps deductions on state and local taxes at $10,000. This means that if your state and local (SALT) tax burden exceeds $10,000 the overage cannot be deducted.
“The lure of New York in the past has been access to financial and professional support, but I can see Austin and cities like it offering significant competition to New York in this area along with lower taxes,” Peter L. Faber, partner at McDermott Will & Emery, told Bloomberg Tax in an email. “I am not sure what states like New York can do to counter this trend except to control government spending and lower taxes.”
Why Austin? Texas has no state income tax. It would not be surprising to see high income earners decide to pick up and leave. However, some analysts say the concerns are overblown.
No Big Deal?
For one, high-income earners are better equipped to deal with an additional tax burden. Second, they may be too comfortable where they are to decide that a moderate tax increase is worth picking up and moving across the country for.
Lower income earners will largely be unaffected. In order for the SALT cap to have an impact, your state and local tax burden would have to exceed $10,000. Typically, you would need to be a higher income earner for this to apply.
The fear has largely been that the new tax structure would dissuade businesses from wanting to set up shop in a state with high local taxes. While the corporate tax rate was slashed under the new federal law, that does not apply to individual income. Executives and high salary management staff might feel the burden.
That may have started to happen.
Stonepeak Infrastructure Partners, a $15-billion firm led by former Blackstone Group LP dealmakers, is planning to open an office in Austin, Texas, in part to protect its executives from potentially higher New York state taxes, according to a memo sent to investors that was obtained by Bloomberg News.
It’s only one example so far. However, it would not be surprising to see other businesses follow suit. New York lawmakers are attempting to develop a deduction workaround. However, it seems that New York taxes may be a little higher for some next year and in the future.
It’s All About Location
That New York taxes are high is not a surprise. However, the tax burden and cost of living can largely be absorbed by higher income earners. Lower income and middle class residents may have fewer options when it comes to avoiding any increase in tax burden or cost of living expenses.
For some, the only option is to move to a state or city with a better cost of living situation. That’s where City vs City can help.
City vs City is a powerful cost of living app. Using real, local data, City vs City calculates how much in pre-tax income you would need to earn in a new city in order to maintain the standard of living you currently enjoy.
Simply download the app, input your data and zip code, and let City vs City god to work. Then, compare your results with another city of your choosing. As a result, you’ll see a side by side breakdown of expenses and a great idea of which city can offer you a better cost of living situation.
If you’re thinking of moving, don’t make a move! Download City vs City first and start comparing your costs across different cities.