So what? Why is the New York Times even writing about this? They are free to do what they want with their money. They were early employees at companies that built products people liked and they were appropriately rewarded. This whole article reads like bait to get people jealous and upset at "those damn techies!". Sure enough if you look at the comments it seems to have worked.
How transparent does the NYT have to be in their desire to destroy the competition (the internet) before people stop reading it?
That's pretty harsh. The reason the NYT writes about anything is because its editors thinks it will attract readers. Usually people read things because the topic is interesting.
I found the topic interesting. Particularly the net worth at which the folks are leaving SF to go to Austin. One guy with a several hundred thousand; someone else with a couple million.
It would be interesting to know the mean and median of these sorts of numbers.
SF is a tough place to live financially these days, and learning about the alternatives is interesting.
The NYT writes not only to attract readers, but also to defend its business model and push the politics of its employees. Attacking Silicon Valley startups accomplishes both of those goals.
I didn't find the article interesting at all. In addition to being naked propaganda the content itself was insight free as it's just a couple of anecdotes about moderately successful people moving to a new city.
>The NYT writes not only to attract readers, but also to defend its business model and push the politics of its employees. Attacking Silicon Valley startups accomplishes both of those goals.
I definitely missed the 'attacking' portion of the article.
That's because there is none. This person you're responding to is taking a story about someone doing a pretty prudent move as an attack on him or herself.
To see the information portrayed in the article as normal and good is a political position, just like seeing it as bad is a political position.
But even if pro-business pragmatism weren't an ideological alignment, politics isn't some dirty thing that innately sullies everything and should be avoided.
My reply should be longer and more helpful, but I'm unable to write clearly right now, so I'll be short but regrettably not nuanced: if it involves other people and shared resources, I don't think you can make it non-political.
If you see politics — not being a politician or partisanship, which have different implications — as inherently bad, you are not seeing politics for what it is; you are seeing politics as some evil process, run by a cabal or by a mob, and your position as inherently logical and reasoned.
This is a bad idea even if you have a good reason to believe you're right. Rumsfeld's "unknown unknowns" are part of why this is a problem.
Let me add a weird metaphor: you are saying smell is something that only comes from perfume, rotten organic matter and certain chemical products. You may not perceive the toned-down smell of things you are surrounded by, like wood, plastics or the air in your office.
This is a good response and I see your point. I don't fully agree though. If someone is making decisions based on their finances, I think it's unhelpful to frame it as "politics" just because there may be some tax implications (the shared resources in your example). If people are moving to a lower tax state to save money, that's not a political decision in my opinion. It's a totally logical financial decision an individual is making.
Now, why I say that this article is political (and unjust imo) is because that very personal and logical decision is being placed by someone else into the realm of politics.
If you have a couple million and want a home in SF you're not going to be able to retire. I'd personally stay in my rent controlled apartment and not buy a home until I was ready. Something else to worry about and take care of.
I see this as the opposite: nyt colluding with silicon valley VCs to show that killing yourself at any and all silicon valley start up is guaranteed to make you a billionaire.
just like when wired published that fake profile for Steve Jobs with the fake cover image that he lived in a SF condo without furniture because he lived for work, and so should you!
There's no evidence that rich are leaving CA in droves. If you like to show off your fancy stuff, there's more people to show it to in CA than TX. Mansions are for ego, not for practical use. If anything, the middle-class is shrinking because housing costs are so high. The homeless come for the weather, so CA is becoming rich or poor, and less middle.
Which is the very definition of "Third World." It would suggest that the policies in place are not generating the kinds of outcomes that typical Americans would like or expect. The actual outcomes are all about concentration of wealth and power while sustaining only a veneer of social responsibility. Look at what the outcomes are, not at what they say they want.
If the plan going forwards is for all but the teeny tiny tippy top of the pyramid to have amazing wealth and comfort while the rest of us suffer, count me out. Might as well revolt now versus wait another decade while the poverty just gets worse and people are even more desperate. What will get people off the couch? Rolling blackouts? Failure of the sewer systems? No food?
No, the definition of Third World is “aligned with neither the US nor Soviet Union in the Cold War”.
Of course, no one uses it according to that or any other well-defined concrete definition anymore (even by the last decades of the Cold War), but it's mostly now used to refer to any country that is neither a North American or Western European capitalist country nor at a similar per-capita GDP of the worst of those.
What will get people off the couch? Rolling blackouts? Failure of the sewer systems? No food?
That's not the level of, "get people off the couch." That's on the way to, "people coming around to your place demanding you give them your stuff, and if you resist, they burn your house down." People's behavior changes a lot if they're hungry.
>There's no evidence that rich are leaving CA in droves. If you like to show off your fancy stuff, there's more people to show it to in CA than TX
I think a lot of people would rather be the bigger fish in the pond though. Also, if you moved to SF specifically to make money you're going to want to protect that payout more so than stay in the city.
"Migration among certain demographic groups also differs from the state’s general pattern. Although California has had net out-migration among most demographic groups, it has gained among those with higher incomes ($110,000 per year or more) and higher levels of education (graduate degrees)."
Related: Texas has had positive net migration for that entire decade. Also related: rich people retiring to a low tax state wasn't invented by young techies.
As a fifth generation Californian, I am not loosing sleep about the state depopulating! Even if it has some years of negative net migration, the long term story is incredible economic and population growth. Slower or negative growth would be helpful in many ways. The state's infrastructure needs to catch up to the growth, particularly in the Bay Area.
In NY there are an unusual number of Florida plated cars driving around in the winter time when no true Floridian would bother visiting (Jan-Feb). Snowbirds come in the warm parts of the year. The wealthy can play their residency games to get the tax regime they want.
The evidence shows that the homeless primarily come from the working class not from out of state. Housing costs are so high that normal people are balanced on the edge. Any unexpected bump like an illness or car trouble can push people into homelessness.
I stopped taking an income because taxes got too high. Investments plus spouse income pushes us into the highest tax bracket for State and Federal (CA is up to 14.5% with both "millionaire taxes) added in. It wasn't worth giving up 56 cents of every dollar to taxes.
I work at a startup now and take no income. I suspect many other people in California are doing the same.
This happens a lot of time for tax evasion (not avoidance) purposes but people don't realize that if they leave CA/NY after negotiations to sell stock have begun,
they are still subject to tax on the sale in their original home states.
That makes sense. So let's say your awarded a pile of shares at $1. A year later they vest at a price of $4, so you pay CA taxes on the $3 of appreciation.
The company goes nuts and the share price is now $40, so you relocate to TX, establish residency (and cut off CA residency), then sell. CA gets nothing and you pay TX taxes on the $36 of appreciation?
"The state with the highest top marginal capital gains tax rate is California (33 percent), followed by New York (31.5 percent), Oregon (31 percent) and Minnesota (30.9 percent).
The nine states with no personal income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming) have the lowest rate in the United States (25 percent)."
Hmmm... interesting that the article disagrees with you on NH.
Further research shows they do not currently tax capital gains, but that they are looking into adding one:
Why is the top Texas blended (state + local + federal) capital gains tax rate 25%, despite the federal top rate being 23.8% and Texas having no state capital gains rate? This seems consistent across all no capital gains tax states, so it can't be a local rate, right?
My scenario:
Founder X has stock. Whether received as stock or converted from options is irrelevant. Founder X, while living in CA, begins talks with Buyer B to buy his stock. Before the sale is signed (or possible even before it is papered), X moves to NV which has no income tax. CA will still tax X on the sale of his stock to B.
You guys are all discussing the initial exercise of stock options, which is way before the situation I am discussing. But to discuss your specific scenario: if there was no agreement to sell (or pending agreement) before leaving CA for TX, CA would not be able to tax you on that sale of the $40 stock if you had established TX residency by the time of that sale.
I love it when people try to explain tax law to me like I don't know what I'm talking about...
Employees are taxed on stock twice. Once, when it is income to them upon vesting options to purchase stock in the black or upon election (i.e., 83b) or (more rarely) when actual stock is receive as compensation for employment, and again when it the actual stock (or more rarely, options) is sold for capital gains. I refer specifically to the sale of the stock, not the execution of the options to acquire stock.
If the exercise of options and their subsequent sale are executed jointly and for the same price, the sale part of the joint transaction doesn't trigger its own set of taxable cap gains. But if, for example, options are exercised for $10 when the stock is worth $15 and the stock is sold for $25, the employee must pay tax on the $5 gains from the exercise and on the $10 gains from the sale.
I understand that you are taxed twice, at vest and at sale. My understanding was that the "California gets taxes no matter where you live" applies to the vest (which is taxed as ordinary income), not the sale (which is taxed as capital gains).
Your other comments suggest you were talking about a very specific situation, where you started negotiating to sell stock, then moved, then the sale closed. If so, then I'm not sure how exactly it gets treated so happy to defer to you, but that doesn't seem at all like what is being discussed in the article.
Yes, in my original comment I was referring to a very narrow situation in which someone moved from CA to a low/no-tax state to avoid taxes on the sale of stock.
>San Francisco, which has gotten increasingly expensive, crowded and filled with carbon-copy tech bros who drone on about their start-ups. They talked about how they were resetting their lives, how stressed they had been in tech and how they were getting over burnout. They talked about the tech parties they had attended and complained that the celebrations revolved around work.
Ironic the bubbles we create end up making the city you live in "carbon copied". Take public transit, volunteer, meet some locals, there are plenty of people who live in SF that don't work in tech.
Yes. The tech-bros are most visible in all the "happening spots" and downtown near all the tech companies--which shouldn't be a surprise.
But there are lots of non tech-bros around Lake Merritt and other parts of the city. It is getting harder for them to stay, but many are still here for now.
"Although California has had net out-migration among most demographic groups, it has gained among those with higher incomes ($110,000 per year or more) and higher levels of education (graduate degrees)."
One of the biggest migrations is coming from NYC, which has a city tax on top of state and federal. So maybe moving from NYC to CA is still a net reduction in taxes?
Also, the age bracket for in-migration is 25-35. So the typical story of people maximizing their career potential despite high taxes. If they had the same career/income opportunity in a lower tax state, would they take it?
NYC's city tax plus the state come out to 11%-ish at the margin for someone bringing in 500k a year. CA's state taxes are in the same ballpark. Plus, NY's property taxes tend to be a bit lower. I'll be paying about $10k/y (unabated) on a $2.4M condo, whereas my house in CA was costing $24k/y on an asset price of $1.7M.
So, I don't think that the reasons to move from NY to CA have much to do with taxes. Having lived in both NYC and Norcal (on the peninsula), I can say that the cost of living in both places is in the same order of magnitude. For me, the main differences are that CA has much better weather and access to the great outdoors, but NYC has a more interesting culture and better food and commuting. I think CA is probably a better place to start your career as a software engineer, but once you're established, there are plenty of opportunities in both places.
For anyone thinking of moving out of California before/during a major tax event, I _highly_ advise finding and planning with a really good CPA and a tax lawyer that they recommend.
I've not personally done it, but I've had my fair share of small talk with CPAs who regal you with "funny" stories about people who attempt to move out of California to avoid the high tax rate when, e.g., they sell their business or some other major tax event.
The California FTB is extremely aggressive in these cases. They will both investigate and sue you. It doesn't take much imagination to know what being sued by a state government is going to be like. (The California FTB is a double edged sword; I've had pleasant and helpful experiences any time I've called them up and asked tax questions; but their attentiveness goes both ways it seems)
So you better have an immaculate plan in place to prove that you have indeed moved out of the state. One person went as far as making sure to keep every Starbucks receipt from their daily coffee trips after moving to Seattle. (And yes, they had to use that evidence)
This only applies to high net worth individuals, and I'm sure the stories can be exaggerated. But a couple hundred bucks of a CPA and lawyer time is worth every penny of the horror you might save in fighting with the FTB.
Also, I didn't see it called out in the article, but the biggest downside of California's tax code isn't so much the high tax rate as it is the treatment of capital gains. California doesn't give special treatment to long term capital gains like the IRS does. So the difference is exaggerated in that case; you're paying a marginal of 20% to the IRS and a marginal of 13% to California. That's rough. I do generally agree with California's way of doing it, but with the way things are today I can see why many HNWI at least fantasize about moving out of California.
Finally, there are some other tricks to avoid California's tax that have varying rates of effectiveness depending on your situation and desires. I find CRTs to be quite interesting if you find yourself in a situation where you have a high tax FU money event and want to both avoid taxes and do good for the world.
Unless they made 7 million or more (after taxes), they will need a job again. The life expectancy of a 35 year old is 50 more years. That is effectively forever when managing money. Single digit millions will not sustain an upper middle class life style forever, even in Texas. When they need a job again, they are better to look where their network and friends are. So stay close to them.
> The life expectancy of a 35 year old is 50 more years. That is effectively forever when managing money.
Can't they just do a lazy portfolio and put 60 percent into stock indexes, for example? Even if there will be a donwturn in the next years the stock market should recover in 10 years or so and produce good yields again.
Even 2 million at a very safe 2% is still 40k/year without touching the principle. That's livable if your house and vehicle are paid for and you have very simple tastes. Realistically you could easily do a lot better through a mix of leveraged rental property and stocks.
Just for a little context, that 40k would be tax free, since the first 40k of cap gains are untaxed. So you'd actually be netting out more than the median American. So, move anywhere where median Americans live, buy a reasonably sized house, and you'll be cruising. I have family that recently bought a huge house bordering on mansion sized in Salt Lake City for under 500k. So if you have $2.5M in the bank and you buy that kind of house with cash, you have a very livable nest egg that should allow you to cruise through the rest of your life not just in acceptable conditions, but in abundance.
>Just for a little context, that 40k would be tax free, since the first 40k of cap gains are untaxed.
Wait, what? How do you figure? First, the $40k referred to is interest on the $2 million, not capital gains. Second, all interest over a trivial amount is taxed as ordinary income. (If it comes from a mutual fund with stock ownership, it could have qualified dividends taxed at a lower rate, but it's still taxed.)
Anyway, I agree it can get you a comfortable life, but you're definitely paying taxes on it.
Generally you'd source some of your "income" from capital gains, and some from dividends. You wouldn't use interest at all. The first 24k of dividends would fall under the standard deduction, assuming you're married. Assuming your "income" is coming half from cap gains and half from dividends, that yields a 0% tax rate (20k dividends @0% and 20k cap gains @0%). And this is of course assuming nothing comes from retirement accounts. In that case, the situation is even more advantageous.
I'm aware ("the first 24k of dividends would fall under the standard deduction" -- from my post). I think you're trying to correct something in my comment, but since I already mentioned the fact you posted, I think you must have misunderstood something, or I must have been unclear. Could you make it more obvious what your objection is?
$7m is $210k annually, do you really think people need that much to retire in Texas? I know many that pull it off with closer to 1.5m in assets with zero principal depletion
... you can live on this if you and your spouse both have perfect health until the very very end. There is a 50% chance one of you will develop a serious health problem that is expensive but not fatal. You will need $3 million to deal with that.
I mean maybe if you don't carry any health insurance and choose not to take advantage of the ACA's guaranteed issuance provisions. Otherwise, it would be quite an uncommon disease that costs $3M to treat.
If you had $2.5M, you could buy a house outright in Texas and still have more than $2M left. Assume a 4% withdrawal rate, that's $60K+ for living expenses after taxes, not including housing costs (because you own outright).
I live a very middle class life in SF right now and don't spend anywhere near $60K for my non-housing costs.
employee 50 at lyft made ~1M over 4 years from their stock gains, i'm assuming that they have not sold much of that stock. fb and google tripled their stock price between 2013 and 2017, and fb quadrupled the stock price from 2013 to now. at that rate, to make a 1M stock package over 4 years only required a stock grant worth between 250k-350k over 4 years, which is rich but does not seem out of the reach of engineers with a few years experience.
He also joined Lyft as a "Support Associate"[1] where he, presumably, got a stock grant that was much much smaller than those for more in demand roles.
He would not have been able to get a stock grant from FB or Google like you describe. It's fine to talk about the risk premium, but you're making an apples to oranges comparison here.
Over the last 10 years, definitely not. You'd be hard-pressed to find many examples of startup rank and file who did better than they could have at FAANGM, even at startups that weren't as voracious consumers of capital (=dilution) as Lyft or Uber. Not everyone can or wants to work at FAANGM, but it definitely shows you shouldn't take a paycut going to a startup and hope to make it up on stock.
California has always been a playground for the young. I moved here about a decade ago, when I was 19, from a small town in Illinois. It was for no particular reason other than it sounded like fun; and it was incredible. The first time I saw any ocean irl was the evening I arrived. I remember how powerful it seemed in the twilight; like I shouldn't get too close, or it'd swallow me up. I immediately set-out along the boardwalk hitting every retailer, cafe, surf shop, bar, and headshop along the way. Within an hour I had landed the dream job... Sketchers. mutha. flippin. shoes y'all! I was a bohemian in paradise, and lived happily ever after.
Fast forward 10 years. I'm totally over the beach. Haven't been to a bar/club in over 6 months. Weeks away from defending my phd at ucsd in computational neuro. anyone here hiring? My only two major preferences: (1) no shoe stores, and (2) not california
I feel like being "weeks away from defending my phd at ucsd in computational neuro" is maybe the most important variable in your story and how you feel about life right now :)
Good luck op (above) on finishing your phd, nothing else matters at this point. After you finish your phd you'll have to decide what to do. Likely you are a great programmer (thus the computational in your 'area'). If you decide to go into building software the world is your oyster, there will be plenty of dev jobs. It will be harder unless you have a connection with a particular job to find something in your particular area (this is true of any computer related phd of course).
One thing to note, the article makes it seem like everybody will make retire early level millions. The reality is, only the first hundred or so will make serious money and this for a mega-unicorn that happens once or twice a generation. Normal exists only make huge money for the investors, the founders and maybe a handful of key employees, not all of which were early (e.g. external CEO hires).
I’ve watched people make a few million on an ipo as an engineer joining a few years pre ipo at your typical unicorn company. I really don’t think it’s uncommon. The thing is, these people do not retire. But they do buy a house.
The headline and most of the article is misleading, implying that you can leave the state to avoid paying taxes on deferred income like RSUs. You can't.
A small blurb of truth from TFA: "California imposes an income tax on shares vested in the state, but does not tax stock that is sold after someone moves away."
This means that the company you work for is going to sell and send the proceeds from basically 40% of your RSUs to the Fed + California governments to pay owed tax, even if you don't life in California at the time the company goes public or has another liquidity event. Anything you hold longer that is subject to capital gains wherever you live.
So they worked hard where the work was, then took their money and moved where it'll last longest.
Sounds smart to me. Nothing shady about it, just playing your cards right. (As a bonus, they leave a high-paying spot and a place to live for someone else to advance into back in California.)
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[ 1.2 ms ] story [ 250 ms ] threadHow transparent does the NYT have to be in their desire to destroy the competition (the internet) before people stop reading it?
I found the topic interesting. Particularly the net worth at which the folks are leaving SF to go to Austin. One guy with a several hundred thousand; someone else with a couple million.
It would be interesting to know the mean and median of these sorts of numbers.
SF is a tough place to live financially these days, and learning about the alternatives is interesting.
I didn't find the article interesting at all. In addition to being naked propaganda the content itself was insight free as it's just a couple of anecdotes about moderately successful people moving to a new city.
I definitely missed the 'attacking' portion of the article.
Defense of the status quo is ideology too.
To see the information portrayed in the article as normal and good is a political position, just like seeing it as bad is a political position.
But even if pro-business pragmatism weren't an ideological alignment, politics isn't some dirty thing that innately sullies everything and should be avoided.
> politics isn't some dirty thing that innately sullies everything and should be avoided.
I strongly disagree with this statement.
If you see politics — not being a politician or partisanship, which have different implications — as inherently bad, you are not seeing politics for what it is; you are seeing politics as some evil process, run by a cabal or by a mob, and your position as inherently logical and reasoned.
This is a bad idea even if you have a good reason to believe you're right. Rumsfeld's "unknown unknowns" are part of why this is a problem.
Let me add a weird metaphor: you are saying smell is something that only comes from perfume, rotten organic matter and certain chemical products. You may not perceive the toned-down smell of things you are surrounded by, like wood, plastics or the air in your office.
Now, why I say that this article is political (and unjust imo) is because that very personal and logical decision is being placed by someone else into the realm of politics.
just like when wired published that fake profile for Steve Jobs with the fake cover image that he lived in a SF condo without furniture because he lived for work, and so should you!
If the plan going forwards is for all but the teeny tiny tippy top of the pyramid to have amazing wealth and comfort while the rest of us suffer, count me out. Might as well revolt now versus wait another decade while the poverty just gets worse and people are even more desperate. What will get people off the couch? Rolling blackouts? Failure of the sewer systems? No food?
No, the definition of Third World is “aligned with neither the US nor Soviet Union in the Cold War”.
Of course, no one uses it according to that or any other well-defined concrete definition anymore (even by the last decades of the Cold War), but it's mostly now used to refer to any country that is neither a North American or Western European capitalist country nor at a similar per-capita GDP of the worst of those.
In high school geography countries were classed as 'developed' or 'developing', although I don't remember the metrics
That's not the level of, "get people off the couch." That's on the way to, "people coming around to your place demanding you give them your stuff, and if you resist, they burn your house down." People's behavior changes a lot if they're hungry.
I think a lot of people would rather be the bigger fish in the pond though. Also, if you moved to SF specifically to make money you're going to want to protect that payout more so than stay in the city.
https://lao.ca.gov/laoecontax/article/detail/265
I work at a startup now and take no income. I suspect many other people in California are doing the same.
The company goes nuts and the share price is now $40, so you relocate to TX, establish residency (and cut off CA residency), then sell. CA gets nothing and you pay TX taxes on the $36 of appreciation?
https://taxfoundation.org/how-high-are-capital-gains-tax-rat...
"The state with the highest top marginal capital gains tax rate is California (33 percent), followed by New York (31.5 percent), Oregon (31 percent) and Minnesota (30.9 percent).
The nine states with no personal income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming) have the lowest rate in the United States (25 percent)."
Hmmm... interesting that the article disagrees with you on NH.
Further research shows they do not currently tax capital gains, but that they are looking into adding one:
https://www.watchdog.org/new_hampshire/new-hampshire-house-m...
My scenario: Founder X has stock. Whether received as stock or converted from options is irrelevant. Founder X, while living in CA, begins talks with Buyer B to buy his stock. Before the sale is signed (or possible even before it is papered), X moves to NV which has no income tax. CA will still tax X on the sale of his stock to B.
You guys are all discussing the initial exercise of stock options, which is way before the situation I am discussing. But to discuss your specific scenario: if there was no agreement to sell (or pending agreement) before leaving CA for TX, CA would not be able to tax you on that sale of the $40 stock if you had established TX residency by the time of that sale.
Employees are taxed on stock twice. Once, when it is income to them upon vesting options to purchase stock in the black or upon election (i.e., 83b) or (more rarely) when actual stock is receive as compensation for employment, and again when it the actual stock (or more rarely, options) is sold for capital gains. I refer specifically to the sale of the stock, not the execution of the options to acquire stock.
If the exercise of options and their subsequent sale are executed jointly and for the same price, the sale part of the joint transaction doesn't trigger its own set of taxable cap gains. But if, for example, options are exercised for $10 when the stock is worth $15 and the stock is sold for $25, the employee must pay tax on the $5 gains from the exercise and on the $10 gains from the sale.
Your other comments suggest you were talking about a very specific situation, where you started negotiating to sell stock, then moved, then the sale closed. If so, then I'm not sure how exactly it gets treated so happy to defer to you, but that doesn't seem at all like what is being discussed in the article.
Ironic the bubbles we create end up making the city you live in "carbon copied". Take public transit, volunteer, meet some locals, there are plenty of people who live in SF that don't work in tech.
But there are lots of non tech-bros around Lake Merritt and other parts of the city. It is getting harder for them to stay, but many are still here for now.
Anecdotal story, without any actual numbers. So some left and some did not. Maybe most of them stay ?
https://lao.ca.gov/laoecontax/article/detail/265
"Although California has had net out-migration among most demographic groups, it has gained among those with higher incomes ($110,000 per year or more) and higher levels of education (graduate degrees)."
Also, the age bracket for in-migration is 25-35. So the typical story of people maximizing their career potential despite high taxes. If they had the same career/income opportunity in a lower tax state, would they take it?
So, I don't think that the reasons to move from NY to CA have much to do with taxes. Having lived in both NYC and Norcal (on the peninsula), I can say that the cost of living in both places is in the same order of magnitude. For me, the main differences are that CA has much better weather and access to the great outdoors, but NYC has a more interesting culture and better food and commuting. I think CA is probably a better place to start your career as a software engineer, but once you're established, there are plenty of opportunities in both places.
I've not personally done it, but I've had my fair share of small talk with CPAs who regal you with "funny" stories about people who attempt to move out of California to avoid the high tax rate when, e.g., they sell their business or some other major tax event.
The California FTB is extremely aggressive in these cases. They will both investigate and sue you. It doesn't take much imagination to know what being sued by a state government is going to be like. (The California FTB is a double edged sword; I've had pleasant and helpful experiences any time I've called them up and asked tax questions; but their attentiveness goes both ways it seems)
So you better have an immaculate plan in place to prove that you have indeed moved out of the state. One person went as far as making sure to keep every Starbucks receipt from their daily coffee trips after moving to Seattle. (And yes, they had to use that evidence)
This only applies to high net worth individuals, and I'm sure the stories can be exaggerated. But a couple hundred bucks of a CPA and lawyer time is worth every penny of the horror you might save in fighting with the FTB.
Also, I didn't see it called out in the article, but the biggest downside of California's tax code isn't so much the high tax rate as it is the treatment of capital gains. California doesn't give special treatment to long term capital gains like the IRS does. So the difference is exaggerated in that case; you're paying a marginal of 20% to the IRS and a marginal of 13% to California. That's rough. I do generally agree with California's way of doing it, but with the way things are today I can see why many HNWI at least fantasize about moving out of California.
Finally, there are some other tricks to avoid California's tax that have varying rates of effectiveness depending on your situation and desires. I find CRTs to be quite interesting if you find yourself in a situation where you have a high tax FU money event and want to both avoid taxes and do good for the world.
Can't they just do a lazy portfolio and put 60 percent into stock indexes, for example? Even if there will be a donwturn in the next years the stock market should recover in 10 years or so and produce good yields again.
Wait, what? How do you figure? First, the $40k referred to is interest on the $2 million, not capital gains. Second, all interest over a trivial amount is taxed as ordinary income. (If it comes from a mutual fund with stock ownership, it could have qualified dividends taxed at a lower rate, but it's still taxed.)
Anyway, I agree it can get you a comfortable life, but you're definitely paying taxes on it.
If you had $2.5M, you could buy a house outright in Texas and still have more than $2M left. Assume a 4% withdrawal rate, that's $60K+ for living expenses after taxes, not including housing costs (because you own outright).
I live a very middle class life in SF right now and don't spend anywhere near $60K for my non-housing costs.
is the risk premium really worth it?
He would not have been able to get a stock grant from FB or Google like you describe. It's fine to talk about the risk premium, but you're making an apples to oranges comparison here.
1. https://www.linkedin.com/in/nathan-rodriguez-05653226/
it's interesting then that both of the people who were interviewed for this article were in non-tech roles (uber guy was in a marketing role).
Over the last 10 years, definitely not. You'd be hard-pressed to find many examples of startup rank and file who did better than they could have at FAANGM, even at startups that weren't as voracious consumers of capital (=dilution) as Lyft or Uber. Not everyone can or wants to work at FAANGM, but it definitely shows you shouldn't take a paycut going to a startup and hope to make it up on stock.
Jesus, there's an 'M' now? I can't keep up with this.
Fast forward 10 years. I'm totally over the beach. Haven't been to a bar/club in over 6 months. Weeks away from defending my phd at ucsd in computational neuro. anyone here hiring? My only two major preferences: (1) no shoe stores, and (2) not california
A small blurb of truth from TFA: "California imposes an income tax on shares vested in the state, but does not tax stock that is sold after someone moves away."
This means that the company you work for is going to sell and send the proceeds from basically 40% of your RSUs to the Fed + California governments to pay owed tax, even if you don't life in California at the time the company goes public or has another liquidity event. Anything you hold longer that is subject to capital gains wherever you live.
https://www.ftb.ca.gov/forms/misc/1100.shtml
Sounds smart to me. Nothing shady about it, just playing your cards right. (As a bonus, they leave a high-paying spot and a place to live for someone else to advance into back in California.)
Kudos to the winners in this game.