Unless the $2T moves to Texas Banks and trades on Texas exchanges (are there any?), The $2T stays where it is and so is irrelevant to the story, just there for the click baiting.
It is about race to the bottom - which state taxes corporations at the lowest rate, or has other corporation friendly laws. There is a reason why huge number of businesses are incorporated in Delaware, a state with a minuscule population of about 1 million. NYC by contrast has 8.5M.
The residents of Delaware perhaps benefit in some minuscule way, but the money isn't being spread out.
I think this is a deeper point that really gets to the heart of what's happening. If you or a corporation have some money, where does it reside? Unless the money is in something tangible (briefcase of cash, gold bullion, or real estate), it doesn't really reside anywhere. On the other hand, you do, which is what determines your tax liability.
An individual’s tax liabilities are different than a business’ tax liabilities, which are mostly dependent on where the services are received. Even independent contractors are subject to market based sourcing rules for determining tax liabilities, similar to how a store without a presence in your state still has to collect and remit sales tax to the jurisdiction that the item was shipped to.
I am not an expert either, and it seems each state has different rules. Searching some variation of “market based sourcing rules for income” should bring up relevant results.
For reference, the method used before was typically called “cost of performance”.
The wealth is not spread. The same few companies still control that $2T, they just moved their offices. All that happened is that now NY&CA lost some jobs/tax revenue.
Did they even lose tax revenue other than income tax from some admin jobs? Most states have moved to market based sourcing rules for corporate taxes, so revenue is taxed where the services are received. If the clients are still in CA/NY, I presume it does not change much.
In either case, changes in income quintile/decile would be a better measure than whatever this article is supposed to show.
> Did they even lose tax revenue other than income tax from some admin jobs?
There's no doubt that there is more to lose than just the direct job losses. There's the GDP impact of those people traveling to the city, eating lunch, taking out clients, sticking around after work to socialize. It's not easy to put a number on it but it's definitely much larger than just the direct income tax losses.
> Most states have moved to market based sourcing rules for corporate taxes, so revenue is taxed where the services are received. If the clients are still in CA/NY, I presume it does not change much.
It doesn't work like that for managing assets as the client is delivering the assets to the manager in their jurisdiction. Where the manager's revenue is taxed is based on the location of those employees and the company headquarters. Not where the customer assets came from.
> States are currently electing to move from performance-based sourcing methods to market-based sourcing, which may prove difficult for PE/VC firms that will be required to allocate management fees to the home states of their investors rather than where they conduct business. The management company may be considered to have economic nexus in a state where its fund’s investors are located if management fees are allocated to those states and economic nexus thresholds are exceeded.
> The management company may be considered to have economic nexus in a state where its fund’s investors are located if management fees are allocated to those states and economic nexus thresholds are exceeded.
Ha! One cannot even imagine the wave of litigation that will fight this effort. I don't see the States winning the cases either.
I believe a big chunk of the NY city budget is property taxes on the big boi buildings all over, as well as private houses. This is why NY is squeezing so hard on things like parking tickets and the MTA, because they are having budgeting issues :( Remember that time where they were overly aggressive ticketing people for seatbelt usage (I loved that because it made people actually buckle up) and it was 100% because they needed revenue.
How many Walmart's worth? (Not a joke, genuine question) Big numbers are meh and for the clicks, just tell us what the aggregate state income tax delta is (federal taxes still getting paid). It's not a total loss, people will still move and work in the locales these jobs moved from, as well as pay property taxes (as real estate prices and rents aren't going down in CA and NY from all available data).
If California and New York want those dollars back, extract it through the federal government and the top 40% of taxpayers who pay federal income tax and can't avoid it (congresscritter hustle). You know, like red states do [1].
(tangentially, this will not age well when Texas and Florida come with their hands out for climate costs [2] [3]; grab those bootstraps y'all)
Not enough to even notice. I live in Texas. They always have some blurb about X company moving to Dallas and "creating" 500 jobs, and that's the last time you hear about them until they pop up in a WARN notice.
I hope to see a lot more of this kind of thing. I never liked or understood that massive Google San Jose project. Hope they change course and spread that investment around more of the country.
Unlike the "survival of the fittest" though, It seems like this often turns into a race to the bottom.
If cities/stats were competing primarily based on quality of life/services/infrastructure then that would be great, but instead they often wind up trying to just offer ever more lavish tax incentives.
Individualized tax incentives are usually bad for everyone else, but having lower taxes across the board encourages governments to be more efficient with their resources and directly benefits the citizenry.
that seems obviously falsifiable. California taxes are quite high and the state of California seems to be a great deal more successful than just about any other state in the nation. It seems like the test has been run and the results are available.
When people move to Texas because there is no income tax, they discover that TX makes up for the difference via higher property tax. I hear anecdotes that for ordinary people, their taxes went up after moving to TX. There is no free lunch.
"Red states" tend to favor tax structures that are regressive and place greater burden on low/middle income people. "Blue states" often try and tax wealth and corporate income and use the money to provide more services.
Are you saying California is rich because it has a high tax rate? I think there may be other geographical and historical reasons for that. Monaco has an even higher GDP and no income tax.
Plus, obviously provided services can make up for the lack of taxes. I'm just saying lower taxes, all other things being equal, are a good thing.
It's working exceptionally well for Ireland, which is going to end up far wealthier per capita than England over time (an extreme inversion to the past). Ireland is one of the only nations in Europe with significant economic growth over the past 15 years, they have been drastically out-competing everybody else for growth. Luring in huge numbers of employers, while deriving your taxes from another source (income taxes, real-estate taxes), works just fine.
Texas, as an example, makes up for its lack of a personal income tax with other taxes. The state is thriving rather than imploding (which is not the same thing as having no problems at all), despite what its detractors would like to see.
I've never seen an example where taxation at a large scale (countries, states) actually turns into a race to the bottom. That's only a theory that has never once come to fruition in actuality. Whereas in actuality what has happened, is that targeted low taxation (eg no state income taxes) is a tremendous competitive advantage if you manage it even somewhat well (offset it with other taxes, and organize it to whatever your state/nation's competitive advantage/s are). Which is why Texas and Florida are expanding, while California and NY are not (despite their former massive advantages). Illinois should be a dramatically better place than what it is in terms of prosperity and quality of life, instead it has been in either a stagnant or moribund condition for a long time, thanks to their poorly managed bureaucracy and relatively high taxation (routinely in the top five in combined local + state income tax rates).
California is not imploding. The anecdotes about people abandoning the state to move to TX and FL ignore the fact that the non-wealthy will discover that their taxes in TX are higher (and the weather is terrible, they can't smoke weed, get an abortion, or enjoy LGBTQ rights).
Ireland is an example of race-to-the-bottom. Their corporate friendly policies benefit them in the short term, but screw over the rest of the developed world. We need to tax the wealthy and corporations, not compete for the favor of our feudal lords.
Why do you think they offer those tax incentives? Could it be that it creates wealth and jobs for the residents of those cities? When AOC and her mob tried to force Amazon out of their NYC expansion and succeeded, Warren Buffet said "it's never a smart move to run rich people out of town".
> When AOC and her mob tried to force Amazon out of their NYC expansion and succeeded, Warren Buffet said "it's never a smart move to run rich people out of town".
According to the article it seems like the impact will primarily be felt in terms of:
1. the commercial property market
2. the loss of high-income taxpayers
The "$2 in assets" figure seems a bit misleading because that isn't money that those states are taxing directly.
What is it that is driving these companies to relocate their HQs? Are the companies themselves saving money on taxes? Is it just that their high-earners want to be in a low/zero income tax state? The article doesn't make that entirely clear.
Don't have resources for what percentage of that comes from the top 1%, but it's likely more skewed than at the Federal level, which is ~45% of income tax.
It's almost as if Prop 13 wasn't a genius idea, and it's starting to come back to bite the state.
My guess is that many people are either not happy or can see the benefits in a less-taxed jurisdiction but moving is not an easy thing. The pandemic might have helped them achieve this move (as many people already were displaced and lots of employees went remote).
Yeah, articles like this frustrate me because there isn't much of an attempt to paint the whole picture. It's a catchy headline and a cursory examination to back it up. For example:
> The net number of taxpayers moving out of New York based on the preliminary 2021 tax-year data at the time was over 10,000 higher than the annual net average of 28,700 personal income taxpayers between 2015 and 2019
There's a turnover of people moving in and out of every state, every year. That the figure was around 1/3 higher in 2021 than in previous years certainly feels notable.
> The migration trend followed a net total of 112,400 taxpayers moving out in 2020, nearly four times as many as in 2019, according to the comptroller’s study.
Now what might have occurred in 2020 to cause such large numbers of moves? It amazes me the article doesn't say the word "COVID" once. In that context the 2021 numbers look like a move back towards the norm of previous years. But there's no attempt to examine that.
The original article came from Bloomberg. It nicely charts out inflows and outflows from each state.
Generally, it's because of lower cost of living. But, there are other things mentioned such as bringing expertise to areas requiring more diverse financial needs, as well as quality of life/relaxed life style. But, almost all studies of this migration point to cost of living.
California leads the nation in quite a few enviromental, consumer safety, consumer protection, and other policy areas and manages to have an economy larger than the lower 25 states in the US combined. They're doing something right, evidently.
It's one thing to say you prefer a state with lower levels of regulation and government services and resulting lower taxes. That's a preference. It's another thing to say that taxes in California are 'well-spent' or not. That's a value judgement for which you've provided no justification.
It was one of the best place on earth for a very long time.
They WERE doing something right. Way back when. It's been over since the 90's.
It is now an absolute shithole, but:
a) many people haven't noticed yet
b) when things were working, they've build up such a gigantic pile of cash that it's going to be a while before what they've actually turned into (something barely better than Mississippi) really shows.
I'm not going to go into the list of things that are deeply broken in Cali, it's just too long, but here's probably one of the most flagrant, and directly linked to how badly money is managed: public schools.
A quick Google search will present all the evidence required: richest state in the union, public schools at the bottom of the hit-parade.
Or, you could look at the state of public transportation, one of the lamest in the world.
Or the chronically jammed freeways, one of the most inefficient system for bringing people from one place to another.
Or you could look at the amount of money wasted on the high speed train project between LA and SF, chronically over budget and never happening.
Or you could just take your car and drive through LA streets and count the potholes on surface streets, assuming your car makes it to the other side in one piece.
While you're at it, please take a look at the electrical grid in LA, it's one of the only place left in the so-called "rich world" where you can actually see it since it's hanging up there, pinned to 50 years old wooden poles. Some use of your tax dollar, right there.
Or you could look at the sheer stupidity of real estate laws which leads to a state with one of the most expensive real estate market in the world while having at the same time a one of the largest stock of land to build on.
If you take into account that the tax burden is one of the highest in the country, it's quite amazing you still manage to find ways to be proud of the place.
It's so frustrating arguing against things like this because no matter where you put goalposts, they always seem to move. You can that CA has terrible transportation systems. Compared to what? Texas? New York? Florida? All the other big states have similar problems. The US is large. we have bad transport, but california's transportation systems sure are better than just about anywhere else you might consider moving in the US. Then in the same breath that you complain about overloaded transport you point to a single transportation project as somehow indicative of a problem as well. Then you talk about potholes? Literally everywhere has potholes. I guarantee you I hit more potholes in rural idaho by an order of magnitude (where there is the luxury of paved roads!). Infrastructure is wildly expensive to maintain and population density is quite low.
Up until this next point I was content to just mark you a troll and move on but your comments on california's electrical systems are incoherent bordering on bizarre. First of all, neither the distribution system or transmission system have anything to do with the argument around taxes. Every inch of it is funded by electrical utility rates. Additionally, california has one of the most advanced electrical systems in north america! California in fact pioneered the CALISO, which is an electronically interconnected system of generation that incorporates load and generation in everything essentially including and west of wyoming. They did this because they were voluntarily transitioning to a system of increased renewable generation to reduce carbon emissions and slow the rate of climate change for everyone, so they took it upon themselves to create a load balancing system from whole cloth incorporating dozens of utilities and hundreds or thousands of industrial facilities and small independent generation plants. This program has been incredibly successful and now controls generation and load of nearly the entire western half of the united states. Additionally, California's transmission systems include pretty advanced facilities for moving huge amounts of power from generation rich areas to load rich areas including projects like the California DC intertie, and countless other existing projects in addition to plans from the CALISO to add nearly 10 billion in new transmission in the coming decade. You literally picked the worst possible thing to criticize California on.
Compare that to the typical bastion of 'don't tread on me' flag waving government-hating libertarians, Texas. Texas has the most laughably incoherant energy policy in the nation, and it shows. The texas grid fails under a stiff breeze and still manages to have incredibly expensive energy prices.
The craziest thing about all of this is I don't even live in California, I just can't stand people that can't appreciate the staggering level of planning and engineering that goes into a system like an entire State and they spend all their time grumbling about potholes and wood distribution poles (?!). You're missing the forest for the trees.
Moves like this happen all the time. The evidence in the article isn't enough for me to know if there is anything worth reporting on going on. A few firms moved - but that happens all the time.
>At least this firmly puts to rest the myth that taxes are somehow proportional to the government services you use.
No one seriously thinks "taxes are somehow proportional to the government services you use" at the individual level. The statement only applies at a societal level.
Proportional, in some general, statistical, but also hard to exactly measure, sense, to how much one benefits directly and indirectly from a stable, liberal state, including very strong private property protections, a legal system, standards and guarantees to encourage confident consumer activity, et c… maybe that, though, if not to literal services personally used.
(But actually not at all, given how low capital gains rates are—being rich is a bargain of a deal)
> At least this firmly puts to rest the myth that taxes are somehow proportional to the government services you use.
No-one has ever seriously claimed that. It's self-evident that billionaires do not use a level of government service proportional to the amount of tax they pay, nor has that ever been expected or intended.
The vast majority of people that support such taxes will absolutely pretend like they’re some sort of service charge. Normally they just pull the “indirectly” card so that they don’t need to quantify anything. You can arbitrarily raise someone else’s tax burden by tacking on more and more things you can claim they indirectly use, while simultaneously arbitrarily lowering your own obligations by simply claiming you don’t benefit as much.
It can be as simple as understanding that, at the point that a single person or small group amasses more than a certain amount of wealth, that as a matter of course they have exploited the system under which they operate, and that it is better for the common good that they be taxed at a higher rate.
Or to quote a random Twit: "Once you reach a billion dollars, you get `I won Capitalism` trophy and your tax rate goes to 100%".
* average 1% asset management fee (modal number if you poke around)
* 0% investment carry (hedge funds get away with charging this, but most asset managers don't)
* 9% effective tax rate (revenues disproportionately go to high earners)
gets you $1.8B lost tax revenues. The 0% carry assumption is very conservative, so the $1.8B is a lower bound. Even so, CA and NY collect about $400B annually. As a first order thing, this doesn't move the needle very much.
Sure. But how many companies are arriving? I'll admit I have no clue but if you're taking negative signals, ignoring positive and then wildly extrapolating future expectations... well, don't do that.
I agree with others about it being unclear what this means: it's not like these companies are relocating their entire workforces to Texas and Tennessee, much less that their workforces want to be relocated to those states.
FTA, it sounds like AllianceBernstein in particular planned this move in 2018, and plans to relocate around 1000 jobs to TN. So that's around 1/4th of their workforce, assuming people go along. AB themselves however are primarily owned by Equitable, which continues to be headquartered in the city. So it's hard to get a clear picture of what any of this actually entails, either for employment figures or local tax take-ins.
Sounds to me a little like being on the negative end of capital flight, and they are trying to do the capital controls that seem internationally unpopular for developing nations to enact.
Was listening to a Peter Zeihan video yesterday about what makes Texas economically successful and he was saying that these big firms love Texas so much because it's a red state with blue cities: https://www.youtube.com/watch?v=K__yDAix51Q
Tl;dw: One of the key points in his hypothesis was that Texas is a Goldilocks zone where firms receive attractive tax breaks from the state and the workers receive attractive services from the cities.
Thoughts on if this model makes sense and if this could make sense for states like NY and CA to follow if so?
Pretty much all cities are “blue” cities. But also, state laws have an outsize impact on quality of life, for things such as paid leave laws, minimum wages, other minimum labor standards, legal cannabis, education funding, women’s healthcare (abortion access), gun laws, assisted suicide, etc.
So a city being “red” or “blue” does not seem like it would make much of a difference.
I think, unfortunately, the insulating effect of wealth can explain some of the individual-level decision making. If we assume these companies are relocating professional, full-time staff, it's very possible those folks are making much, much more than the locals. When I lived in Texas, I made several times more than the median income for my metro area, and that's while still being paid less than my coastal peers. Someone in that situation may not agree with local policies around housing, or healthcare, or transportation, or whatever; but they're also likely to be able to spend their way out of any problems that they encounter with those policies.
Likewise, a professional couple relocating from New York may not agree with state or local policies around schools, or gun control, or air quality; but they can probably afford private schools (which they were probably already using in New York, even if they largely agreed with NY's public school policy), and a home in a secure neighborhood, and an electric car. They may have delayed having kids, or had fewer kids, or maybe they don't have kids at all and live the DINK life where there DI goes much, much further.
Cities like Austin have all the amenities that a "lifestyle leftist" would want: local stores selling local goods and produce; farm-to-table restaurants; a vibrant arts scene; plentiful EV chargers; etc. Such a person will probably live near like-minded people, with whom they will lament that Abbot has to go and that it's unfortunate that the state government is so hostile to teachers, or the environment, or trans people; but they're not going to take meaningful action that might bite the hand that feeds, like pushing to reduce corporate subsidies or increasing financial or environmental regulations.
I've lived in Austin for about a quarter century. All of my extended family are from upstate NY (parents/grandparents from there originally).
Totally agree with what you've said about upstate NY - it's pretty depressing to visit these days. Taxes and regulations aren't the only aspect, but they're a huuuge part of it. Have seen some valiant efforts to turn things around (e.g. SUNY), will have to see how that works out.
With regard to Austin and TX, will be interesting to see how that plays out. Austin has always been more liberal ("The People's Republic of Austin" was a nickname), but now essentially all the major cities in TX (not to mention everywhere else) are liberal. TX State Leg and Austin used to fight a lot, but things have gotten decidedly worse recently with the state trying to neuter all local control (and even doing some particularly gross things like passing voting legislation that only applies to Houston). See https://www.texasobserver.org/death-star-hb-2127-democracy/
I used to love Austin, but not so much anymore, and it's not just a "back in my day" story. When I first moved here, I thought "yeah, it's smack in the middle of Texas, and it doesn't have anywhere near the amenities (arts, sports, architecture, transit connections, etc.) of a larger coastal city. But it's so much cheaper than those cities, so you can actually afford to take a lot more advantage of the things it has. And from a weather perspective, sure you've got 2 months of super hot summer, but then you get 10 months of great weather."
Those tradeoffs have started to go rotten. Austin is now expensive as fuck (with the traffic to match) but it still lacks the amenities of a larger city. The state government has really started negatively affecting the day-to-day lives of citizens. And from a weather perspective, this is not just a hellish summer - we've never had anything like this continuous onslaught of 105+ days, and it's only going to get worse.
The "red state" part will eventually bite the "blue cities". Sure, Austin and Houston are blue - but the gun laws in Texas practically encourage gun purchases, you still can't get an Abortion in Austin, the state is still out to get you if you're LGBT, weed = jail, and companies are constrained in what they can say.
Look at Disney and Florida as a good example. Big firms (and the employees that want the personal freedom to love who they want, and make the medical decisions they need to make). This is a very (unsurprisingly) short minded perspective. It matters if the states are blood red.
Despite these concerns, Texas and Florida are gaining population and firms while California and New York are losing population and firms.
How might this play out over the years ahead? What might this mean for the long term prosperity of these states respectively as capital (human and material) shifts from blue states to red states? Will CA and NY maintain their entitlements and policies as their tax base moves out? Will FL and TX eventually turn blue and this happens all over again?
It's a lot of questions, but trying to leave it open ended and as unbiased as possible.
As a resident of the SF Bay Area, I am constantly reading doom and gloom stories about CA and the Bay Area losing population to FL and TX. The numbers are usually manipulated, taken out of context, or represent temporary blips like COVID.
Counter-balancing those stories are when people move to Texas for the lack of income tax, they discover that TX Makes up for that with higher property tax, and the weather is terrible.
It would be great if there was an exodus of people out of the Bay Area, then the place might become less insanely expensive.
There probably are too many people in SF and spreading out would increase much needed housing supply in that market.
On the topic of property tax, that very well might be true for CA, although NY and TEX property tax seems similar despite the average home in TEX being almost half as much. https://www.rocketmortgage.com/learn/property-taxes-by-state. Additionally, there may be other cost of living factors that make TEX more or less attractive.
SF needs more housing, and is facing a problem because they went all-in on tech, and most people aren't returning to those expensive SF offices. Those problems are all manageable, but there will be pain in the short term.
The big win by moving out of CA is affordable housing. However, most of the cool alternatives like Austin and Portland have also gentrified (and they hate Californians, at least in Oregon)
That’s all well and good, but the Texas legislature is working overtime (well, as much overtime as can be worked, given they meet for a few weeks every couple years) to wrest as much control from the cities as possible. Houston no longer gets to run its own elections or school system, and in a few days an expansive, vaguely worded law is coming into effect that basically strips home rule away from the cities. No animal welfare laws for you, Texas cities!
To be fair, the cities were passing draconian laws like “outdoor workers must receive periodic water breaks” so I, for one, am glad that the legislature is standing between us and the jackbooted thugs of the regulatory state.
Kinda meaningless. Headquarters doesn't mean much. Companies have employees everywhere no matter what. Commercial real estate is getting hammered by wfh more than anything else. Prior to covid, NYC office space was overcapacity as was residential. With accelerating plans to convert office to residential this will only be a benefit.
It will be really interesting to see the impact Dobbs has on these kinds of relocations going forward, as well as things like some of these states' new laws regarding transgender medical care.
WRT Dobbs, while people think it is ostensibly about abortion, in many cases it is simply about access to healthcare, regardless of your views on abortion. There are many women, especially professional women, who will flat out refuse to move to Texas. I've lived in Texas for over 2 decades, and personally know more than one couple (all of whom desperately wanted children) that had to leave Texas to terminate pregnancies after doctors determined the fetus had conditions "incompatible with life". And this was before Dobbs. These are not rare cases.
With regard to transgender rights, I know a highly educated professional in Texas that moved to Washington State because his child is transgender.
Regardless of one's views on abortion or LGBTQ rights specifically, when it comes to individual, personal cases, I have yet to find anyone who wants their medical options limited by a bunch of politicians in the state legislature. Companies that need a highly educated workforce are going to find they will have difficulty getting people to certain states based on state reduction in personal rights. I actually think the states that will be most poised to benefits are those with a lot lower taxes/regulations than CA/NY, but who haven't passed as restrictive laws as places like TX and TN.
If you WFH and your H is in a different state, for healthcare, are you subject to the laws of HQ's state, or the state you live in?
It's in interesting that for more personal decisions (i.e., child is transgender) WFH - or the lack there of - has sociopolitical impact, and is not simply work related.
The state you live in. Likewise, your insurance provider can cover procedures that are legal where you live, even if they aren't where your employer is located. Not all insurance providers/plan managers cover abortion, but if yours does, they would probably cover the procedure if, e.g., you lived in Washington and your employer was located in Texas. They may even cover a procedure performed outside your home state should you need to travel, though it may be at out-of-network rates.
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[ 2.0 ms ] story [ 154 ms ] threadThe residents of Delaware perhaps benefit in some minuscule way, but the money isn't being spread out.
For reference, the method used before was typically called “cost of performance”.
In either case, changes in income quintile/decile would be a better measure than whatever this article is supposed to show.
There's no doubt that there is more to lose than just the direct job losses. There's the GDP impact of those people traveling to the city, eating lunch, taking out clients, sticking around after work to socialize. It's not easy to put a number on it but it's definitely much larger than just the direct income tax losses.
> Most states have moved to market based sourcing rules for corporate taxes, so revenue is taxed where the services are received. If the clients are still in CA/NY, I presume it does not change much.
It doesn't work like that for managing assets as the client is delivering the assets to the manager in their jurisdiction. Where the manager's revenue is taxed is based on the location of those employees and the company headquarters. Not where the customer assets came from.
If I recall correctly NYC has a 1% income tax so the City alone is missing out on 200 million a year in tax revenue.
Edit: thanks for the correction
https://www.mhmcpa.com/insights/article/evaluating-economic-...
> States are currently electing to move from performance-based sourcing methods to market-based sourcing, which may prove difficult for PE/VC firms that will be required to allocate management fees to the home states of their investors rather than where they conduct business. The management company may be considered to have economic nexus in a state where its fund’s investors are located if management fees are allocated to those states and economic nexus thresholds are exceeded.
https://rsmus.com/insights/services/business-tax/state-nexus...
Ha! One cannot even imagine the wave of litigation that will fight this effort. I don't see the States winning the cases either.
If California and New York want those dollars back, extract it through the federal government and the top 40% of taxpayers who pay federal income tax and can't avoid it (congresscritter hustle). You know, like red states do [1].
(tangentially, this will not age well when Texas and Florida come with their hands out for climate costs [2] [3]; grab those bootstraps y'all)
[1] https://wallethub.com/edu/states-most-least-dependent-on-the...
[2] https://www.marketwatch.com/story/florida-and-texas-are-expe...
[3] https://www.science.org/doi/10.1126/science.aal4369
Real estate price changes are maybe good for NY and CA but of course you get rising prices in the new states.
If cities/stats were competing primarily based on quality of life/services/infrastructure then that would be great, but instead they often wind up trying to just offer ever more lavish tax incentives.
"Red states" tend to favor tax structures that are regressive and place greater burden on low/middle income people. "Blue states" often try and tax wealth and corporate income and use the money to provide more services.
Plus, obviously provided services can make up for the lack of taxes. I'm just saying lower taxes, all other things being equal, are a good thing.
Texas, as an example, makes up for its lack of a personal income tax with other taxes. The state is thriving rather than imploding (which is not the same thing as having no problems at all), despite what its detractors would like to see.
I've never seen an example where taxation at a large scale (countries, states) actually turns into a race to the bottom. That's only a theory that has never once come to fruition in actuality. Whereas in actuality what has happened, is that targeted low taxation (eg no state income taxes) is a tremendous competitive advantage if you manage it even somewhat well (offset it with other taxes, and organize it to whatever your state/nation's competitive advantage/s are). Which is why Texas and Florida are expanding, while California and NY are not (despite their former massive advantages). Illinois should be a dramatically better place than what it is in terms of prosperity and quality of life, instead it has been in either a stagnant or moribund condition for a long time, thanks to their poorly managed bureaucracy and relatively high taxation (routinely in the top five in combined local + state income tax rates).
Ireland is an example of race-to-the-bottom. Their corporate friendly policies benefit them in the short term, but screw over the rest of the developed world. We need to tax the wealthy and corporations, not compete for the favor of our feudal lords.
That...doesn't sound like him and certainly seems at odds with his actual public statements on the topic: https://www.cnbc.com/video/2019/02/25/warren-buffett-amazon-...
1. the commercial property market 2. the loss of high-income taxpayers
The "$2 in assets" figure seems a bit misleading because that isn't money that those states are taxing directly.
What is it that is driving these companies to relocate their HQs? Are the companies themselves saving money on taxes? Is it just that their high-earners want to be in a low/zero income tax state? The article doesn't make that entirely clear.
California state revenue is ~66% income tax.
Don't have resources for what percentage of that comes from the top 1%, but it's likely more skewed than at the Federal level, which is ~45% of income tax.
It's almost as if Prop 13 wasn't a genius idea, and it's starting to come back to bite the state.
Yeah, articles like this frustrate me because there isn't much of an attempt to paint the whole picture. It's a catchy headline and a cursory examination to back it up. For example:
> The net number of taxpayers moving out of New York based on the preliminary 2021 tax-year data at the time was over 10,000 higher than the annual net average of 28,700 personal income taxpayers between 2015 and 2019
There's a turnover of people moving in and out of every state, every year. That the figure was around 1/3 higher in 2021 than in previous years certainly feels notable.
> The migration trend followed a net total of 112,400 taxpayers moving out in 2020, nearly four times as many as in 2019, according to the comptroller’s study.
Now what might have occurred in 2020 to cause such large numbers of moves? It amazes me the article doesn't say the word "COVID" once. In that context the 2021 numbers look like a move back towards the norm of previous years. But there's no attempt to examine that.
Generally, it's because of lower cost of living. But, there are other things mentioned such as bringing expertise to areas requiring more diverse financial needs, as well as quality of life/relaxed life style. But, almost all studies of this migration point to cost of living.
https://www.bloomberg.com/graphics/2023-asset-management-rel...
It's one thing to say you prefer a state with lower levels of regulation and government services and resulting lower taxes. That's a preference. It's another thing to say that taxes in California are 'well-spent' or not. That's a value judgement for which you've provided no justification.
It was one of the best place on earth for a very long time.
They WERE doing something right. Way back when. It's been over since the 90's.
It is now an absolute shithole, but:
I'm not going to go into the list of things that are deeply broken in Cali, it's just too long, but here's probably one of the most flagrant, and directly linked to how badly money is managed: public schools.A quick Google search will present all the evidence required: richest state in the union, public schools at the bottom of the hit-parade.
Or, you could look at the state of public transportation, one of the lamest in the world.
Or the chronically jammed freeways, one of the most inefficient system for bringing people from one place to another.
Or you could look at the amount of money wasted on the high speed train project between LA and SF, chronically over budget and never happening.
Or you could just take your car and drive through LA streets and count the potholes on surface streets, assuming your car makes it to the other side in one piece.
While you're at it, please take a look at the electrical grid in LA, it's one of the only place left in the so-called "rich world" where you can actually see it since it's hanging up there, pinned to 50 years old wooden poles. Some use of your tax dollar, right there.
Or you could look at the sheer stupidity of real estate laws which leads to a state with one of the most expensive real estate market in the world while having at the same time a one of the largest stock of land to build on.
If you take into account that the tax burden is one of the highest in the country, it's quite amazing you still manage to find ways to be proud of the place.
Up until this next point I was content to just mark you a troll and move on but your comments on california's electrical systems are incoherent bordering on bizarre. First of all, neither the distribution system or transmission system have anything to do with the argument around taxes. Every inch of it is funded by electrical utility rates. Additionally, california has one of the most advanced electrical systems in north america! California in fact pioneered the CALISO, which is an electronically interconnected system of generation that incorporates load and generation in everything essentially including and west of wyoming. They did this because they were voluntarily transitioning to a system of increased renewable generation to reduce carbon emissions and slow the rate of climate change for everyone, so they took it upon themselves to create a load balancing system from whole cloth incorporating dozens of utilities and hundreds or thousands of industrial facilities and small independent generation plants. This program has been incredibly successful and now controls generation and load of nearly the entire western half of the united states. Additionally, California's transmission systems include pretty advanced facilities for moving huge amounts of power from generation rich areas to load rich areas including projects like the California DC intertie, and countless other existing projects in addition to plans from the CALISO to add nearly 10 billion in new transmission in the coming decade. You literally picked the worst possible thing to criticize California on.
Compare that to the typical bastion of 'don't tread on me' flag waving government-hating libertarians, Texas. Texas has the most laughably incoherant energy policy in the nation, and it shows. The texas grid fails under a stiff breeze and still manages to have incredibly expensive energy prices.
The craziest thing about all of this is I don't even live in California, I just can't stand people that can't appreciate the staggering level of planning and engineering that goes into a system like an entire State and they spend all their time grumbling about potholes and wood distribution poles (?!). You're missing the forest for the trees.
No one seriously thinks "taxes are somehow proportional to the government services you use" at the individual level. The statement only applies at a societal level.
(But actually not at all, given how low capital gains rates are—being rich is a bargain of a deal)
You are confusing "service fees" with taxes. There are various tax regimes. Very few of them are proportional to the services you use.
No-one has ever seriously claimed that. It's self-evident that billionaires do not use a level of government service proportional to the amount of tax they pay, nor has that ever been expected or intended.
[citation needed]
It can be as simple as understanding that, at the point that a single person or small group amasses more than a certain amount of wealth, that as a matter of course they have exploited the system under which they operate, and that it is better for the common good that they be taxed at a higher rate.
Or to quote a random Twit: "Once you reach a billion dollars, you get `I won Capitalism` trophy and your tax rate goes to 100%".
* average 1% asset management fee (modal number if you poke around)
* 0% investment carry (hedge funds get away with charging this, but most asset managers don't)
* 9% effective tax rate (revenues disproportionately go to high earners)
gets you $1.8B lost tax revenues. The 0% carry assumption is very conservative, so the $1.8B is a lower bound. Even so, CA and NY collect about $400B annually. As a first order thing, this doesn't move the needle very much.
FTA, it sounds like AllianceBernstein in particular planned this move in 2018, and plans to relocate around 1000 jobs to TN. So that's around 1/4th of their workforce, assuming people go along. AB themselves however are primarily owned by Equitable, which continues to be headquartered in the city. So it's hard to get a clear picture of what any of this actually entails, either for employment figures or local tax take-ins.
This isn't like an auto plant leaving town. This is a few dozen people who move electrons around.
Tl;dw: One of the key points in his hypothesis was that Texas is a Goldilocks zone where firms receive attractive tax breaks from the state and the workers receive attractive services from the cities.
Thoughts on if this model makes sense and if this could make sense for states like NY and CA to follow if so?
So a city being “red” or “blue” does not seem like it would make much of a difference.
Companies are moving to Texas, and cities like Austin seem to be popular amongst people who agree with leftist perspectives.
fwiw, I'm from up upstate NY and what we've seen is companies and people leaving over the decades while taxes increasing. It doesn't seem sustainable.
Likewise, a professional couple relocating from New York may not agree with state or local policies around schools, or gun control, or air quality; but they can probably afford private schools (which they were probably already using in New York, even if they largely agreed with NY's public school policy), and a home in a secure neighborhood, and an electric car. They may have delayed having kids, or had fewer kids, or maybe they don't have kids at all and live the DINK life where there DI goes much, much further.
Cities like Austin have all the amenities that a "lifestyle leftist" would want: local stores selling local goods and produce; farm-to-table restaurants; a vibrant arts scene; plentiful EV chargers; etc. Such a person will probably live near like-minded people, with whom they will lament that Abbot has to go and that it's unfortunate that the state government is so hostile to teachers, or the environment, or trans people; but they're not going to take meaningful action that might bite the hand that feeds, like pushing to reduce corporate subsidies or increasing financial or environmental regulations.
Totally agree with what you've said about upstate NY - it's pretty depressing to visit these days. Taxes and regulations aren't the only aspect, but they're a huuuge part of it. Have seen some valiant efforts to turn things around (e.g. SUNY), will have to see how that works out.
With regard to Austin and TX, will be interesting to see how that plays out. Austin has always been more liberal ("The People's Republic of Austin" was a nickname), but now essentially all the major cities in TX (not to mention everywhere else) are liberal. TX State Leg and Austin used to fight a lot, but things have gotten decidedly worse recently with the state trying to neuter all local control (and even doing some particularly gross things like passing voting legislation that only applies to Houston). See https://www.texasobserver.org/death-star-hb-2127-democracy/
I used to love Austin, but not so much anymore, and it's not just a "back in my day" story. When I first moved here, I thought "yeah, it's smack in the middle of Texas, and it doesn't have anywhere near the amenities (arts, sports, architecture, transit connections, etc.) of a larger coastal city. But it's so much cheaper than those cities, so you can actually afford to take a lot more advantage of the things it has. And from a weather perspective, sure you've got 2 months of super hot summer, but then you get 10 months of great weather."
Those tradeoffs have started to go rotten. Austin is now expensive as fuck (with the traffic to match) but it still lacks the amenities of a larger city. The state government has really started negatively affecting the day-to-day lives of citizens. And from a weather perspective, this is not just a hellish summer - we've never had anything like this continuous onslaught of 105+ days, and it's only going to get worse.
Look at Disney and Florida as a good example. Big firms (and the employees that want the personal freedom to love who they want, and make the medical decisions they need to make). This is a very (unsurprisingly) short minded perspective. It matters if the states are blood red.
How might this play out over the years ahead? What might this mean for the long term prosperity of these states respectively as capital (human and material) shifts from blue states to red states? Will CA and NY maintain their entitlements and policies as their tax base moves out? Will FL and TX eventually turn blue and this happens all over again?
It's a lot of questions, but trying to leave it open ended and as unbiased as possible.
Counter-balancing those stories are when people move to Texas for the lack of income tax, they discover that TX Makes up for that with higher property tax, and the weather is terrible.
It would be great if there was an exodus of people out of the Bay Area, then the place might become less insanely expensive.
On the topic of property tax, that very well might be true for CA, although NY and TEX property tax seems similar despite the average home in TEX being almost half as much. https://www.rocketmortgage.com/learn/property-taxes-by-state. Additionally, there may be other cost of living factors that make TEX more or less attractive.
The big win by moving out of CA is affordable housing. However, most of the cool alternatives like Austin and Portland have also gentrified (and they hate Californians, at least in Oregon)
To be fair, the cities were passing draconian laws like “outdoor workers must receive periodic water breaks” so I, for one, am glad that the legislature is standing between us and the jackbooted thugs of the regulatory state.
The revenue from % of investment profits, generally in 15-20% range, is additional and harder to estimate.
But California's GDP rises faster than most states and countries in the world so it's probably good the rest of the world gets our hand-me-downs...
WRT Dobbs, while people think it is ostensibly about abortion, in many cases it is simply about access to healthcare, regardless of your views on abortion. There are many women, especially professional women, who will flat out refuse to move to Texas. I've lived in Texas for over 2 decades, and personally know more than one couple (all of whom desperately wanted children) that had to leave Texas to terminate pregnancies after doctors determined the fetus had conditions "incompatible with life". And this was before Dobbs. These are not rare cases.
With regard to transgender rights, I know a highly educated professional in Texas that moved to Washington State because his child is transgender.
Regardless of one's views on abortion or LGBTQ rights specifically, when it comes to individual, personal cases, I have yet to find anyone who wants their medical options limited by a bunch of politicians in the state legislature. Companies that need a highly educated workforce are going to find they will have difficulty getting people to certain states based on state reduction in personal rights. I actually think the states that will be most poised to benefits are those with a lot lower taxes/regulations than CA/NY, but who haven't passed as restrictive laws as places like TX and TN.
It's in interesting that for more personal decisions (i.e., child is transgender) WFH - or the lack there of - has sociopolitical impact, and is not simply work related.