Effect on children’s wealth when parents move to Florida

Happy Bastille Day! Let’s look at the likelihood of kids being able to afford that trip to Paris…

Taxes weren’t a factor in our decision to relocate to Florida, but it is interesting to look at how a parental move to Florida can affect the wealth of children. I built a spreadsheet positing an already-sort-of-rich Massachusetts resident who moves to Florida 30 years prior to his/her/zir/their death (e.g., will live in Florida from 52 until 82, the median age at death of a COVID-19 victim here in Maskachusetts). The assumption is that this person will pay the top rates for any progressive taxation scheme. Since big numbers are tough to work with, I looked at the effect on the margin. The parent decides not to buy a $100,000 C8 Corvette (marked up from the $60,000 list price in our “no-inflation society” (TM)) and instead invests the money in the stock of a standard C corporation, to be saved for the benefit of the children. Keep in mind that this is a post-tax $100,000, which might have required earning $200,000 pre-tax (or, for those who prefer not to work, having sex with someone who earns a reasonably high income; see Real World Divorce for state-by-state child support profit calculations).

I started by assuming that the government isn’t lying to us and therefore use an inflation rate of 3 percent. If we assume real profits of 4 percent, that gives us a nominal return of 7 percent. The company pays 24.6 percent state and federal corporate income tax (Tax Foundation/OECD). We assume that these dividends are qualified and therefore a federal tax of 23.8 percent is due (20% plus Obamacare surtax). Maskachusetts income tax is 5 percent vs. 0 percent in FL. We assume that there is some way to invest these dividends and get a 5 percent annual return. When the 82-year-old is killed by Delta Epsilon Zeta variant COVID, Massachusetts estate tax takes 16 percent of the accumulated total while the Feds take 40 percent. Florida has no estate tax. Thanks partly to the miracle of compound interest and partly to the miracle of inflation, the $100,000 invested would have turned into $956,012 in a no-tax environment. In the Florida environment, however, it turns into $391,526 at death. In the Massachusetts environment, $275,287. Children end up 42 percent richer if the parent moves.

(You can check my calculations in this Google spreadsheet (downloads in Excel format; also available as a Web page).)

What’s the effective tax rate? In “I Can Afford Higher Taxes. But They’ll Make Me Work Less.” (NYT, 2010), Harvard professor Greg Mankiw calculated the total marginal tax rate on additional earnings for him was 90 percent (assuming that his goal was to help out his children). If we look the profits in nominal terms, subtracting the original $100,000 investment, we find that there was $291,526 profit in Florida compared to $856,012 in the no-tax case. Florida didn’t take anything, but the Feds and maybe some states via corporate income tax took 66 percent. In MA, the nominal profit was $175,287, resulting in a tax rate of 80 percent. What if we look at this in real terms, though. The $100,000 would have grown to $242,726 just from inflation alone. If we subtract this from the MA net of $275,287, the result is a total tax rate of 95 percent, since the real after-tax profit was only $32,561. The tax rate for the Florida residency case comes up to 79 percent of real after-tax profits (again, because of Federal taxation, not because Florida has an income or estate tax).

What if we assume the same real return on investment for corporations, but set inflation at 8 percent and therefore nominal earnings are 12 percent? The effective tax rate for a Floridian is remarkably stable, moving up to only 81 percent (from 79 percent). The effective tax rate for the person who lives and dies in Massachusetts, however, is 98.6 percent. (See revised spreadsheet (or as a Web page).)

What if the parent is a genius at picking stocks and he/she/ze/they selects only those with 8 percent real earnings (11 percent nominal)? The numbers are fairly stable, with the Florida corpse being worth 43 percent more. The Massachusetts real tax rate falls to 88.5 percent (from 95 percent).

Loosely related, a statute celebrating the “world’s first commercial airline flight,” which operated from St. Petersburg to Tampa beginning in 1914. The airline was started by Thomas W. Benoist, who died in an accident in 1917… stepping off a streetcar.

Wikipedia says that the signs should be amended to read “first fixed-wing scheduled airline” because the Germans were operating Zeppelins earlier. (The photo is from the St. Petersburg Pier, June 2021.)

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PODS versus PACK-RAT for moving and storage

For the move from Massachusetts to Florida we decided that it would make the most sense to use at least two containers and a dumpster. Container A for the apartment we’re moving into. Container B to a storage facility near the apartment for eventual delivery to a house when we become stupid enough to purchase one. Dumpster for everything else.

We looked at the market leader, PODS, first. They wanted $4,770 per container (16x8x8′) for the move and $265/month per container for rental or storage. The container is wood, steel, and fiberglass and can hold up to 4,200 lbs.

PACK-RAT does not have as large a service area, but they cover West Palm Beach and Boston. The container is the same size, but all steel, like a standard container for a container ship (suitable for jamming into the Suez Canal!). The price for the container/storage is about the same, but they’ll move three containers to Florida (all fit on one truck) for what PODS charges to move two.

A typical cluttered house will require three containers. We’re hoping to trash a lot of stuff, but we also have some aviation gear currently stored in hangars.


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Is Florida better set up to handle multi-culturalism than the rest of the U.S.?

When I talked to a neighbor in Cambridge, MA regarding our upcoming move to Jupiter, Florida (see Relocation to Florida for a family with school-age children) she responded that she wouldn’t want to live anywhere that had privately set up limits on human behavior, e.g., through homeowners’ associations and the covenants and deed restrictions that go with them. She didn’t like the idea that she might not be able to stage a big political demonstration on the street in front of her house (likely illegal in Massachusetts anyway as a violation of one of the governor’s 68 COVID-19 emergency orders).

I found part of the agreement for those who live in Abacoa, a neighborhood within Jupiter. Pit bulls are banned:

Obviously this is not going to increase happiness among those who love pit bulls, but for the average person it might be nice to know that something that is legal under state law won’t happen in one’s neighborhood. (A recent afternoon for a couple of pit bulls: “3-Year-Old Was Playing in Yard for 1st Time With Family When Neighbor’s Dog Attacked, Killing Him”, which notes “a neighbor’s dog escaped an enclosure and attacked them both, killing the young child and leaving his mother severely injured, a source close to the family told NBC New York.”)

My response to the neighbor:

I think Florida’s approach is more sustainable, actually. The U.S. is trending toward a population of 500 million people who have different cultures, languages, expectations, etc. With Chinese-style population density, but without a Chinese-style unified culture and language, we’re going to need more explicit rules if we want people to get along.

If we ever become stupid enough to win a bidding war for a house down there (going to rent at first), it might be burdensome to have to clean up our front yard every evening, but maybe we will come to love the fact that neighbors can’t park ugly boats and RVs in their driveways, keep human-killing dog breeds, be as messy with their yards as we’ve been with ours here in MA, etc. I’ll be sad that I never got to execute on my dream of painting one of the garage doors in a rainbow flag and the other one as a huge BLM banner, but I’ve reached the age where I realize that not all of dreams are attainable.

Readers: What do you think? Does it make sense that a country of 331 million would need more rules than a country of 100 million (the U.S., circa 1920)?

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Joe Biden’s mask order meets Florida

The Florida Free State ends at the border with federally-owned land, e.g., Everglades National Park. See “Biden’s first executive order will require masks on federal property” (CNN). The order isn’t quite as stringent as what we have in Maskachusetts. It is legal to be in the middle of federally-owned woods without a mask on, for example, but you’re supposed to wear one if you can’t maintain a 6′ social distance.

How much difference in individual behavior occurs when there is effective leadership in Washington, D.C.? Last month both Floridians and out-of-towners mingled on the Anhinga Trail boardwalk, politely sharing information regarding alligator and bird sightings. Although a few folks sported chin diapers, nobody actually wore a mask, despite this being the most crowded part of the park, even when coming close to another person (every few minutes).

The #Science-informed Federales want you to stay healthy by drinking nothing but Coke. At the trailhead:

(#Science says protect yourself against an airborne virus by washing your soda can, a behavior that would previously have earned you a diagnosis of Obsessive Compulsive Disorder. See also Does disinfectant theater contribute to coronaplague?)

Government experts remind us that immigrants from Africa, Central America, and South America are “unwelcome” and “crowd out their native neighbors”:

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Automotive evidence of people escaping to Florida

From a late April trip, our Hertz rental. Note the California plates, evidence that a modern-day Joad family escaped California’s lockdowns and 13 percent state income tax via a one-way trip:

It was common to see cars with insignia relating to dealers in New England or New York and Florida plates, indicating a permanent move. Example:

Separately, Matty’s Gelato (Juno Beach, near Ivanka Trump’s new house in Jupiter, Florida) is great!


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Relocation to Florida for a family with school-age children

During my travels around the U.S. and in conversations with people from various European nations, I’ve come to realize that COVID-19 could be considered primarily a mental condition in that the same virus has radically different effects depending on an individual’s or society’s psychology. People in Sweden, Florida, South Dakota, for example, have the same information regarding COVID-19 that everyone else has, but they process this information differently than folks in Germany, California, or Massachusetts. Given the information that life has become slightly riskier, it isn’t inevitable that a human or group of humans would choose a particular course of action.

One thing that is unusual about the U.S. is that we have the power to move among radically different social, economic, and legal environments simply by moving from state to state. Think that having sex with a high-income person such as Hunter Biden should result in higher spending power than going to college and working? Move to Massachusetts. Think that college+medical school+working as a physician should pay more than having sex with a dermatologist? Move to Texas, where child support profits are capped. Agree with Bernie Sanders that Black Lives Matter, but don’t want to live with any Black people? Move to Vermont. Want to live among Latinx and pay a total tax rate of 4 percent? Move to Puerto Rico. Love guns? Arizona.

The same situation applies with reactions to Covid-19. If you want the governor to tell you when it is legal to leave your house, California and Massachusetts are great choices (ranking). If you don’t think shutdowns and school closures are effective ways to deal with Covid-19 and/or you simply think that continuity of education, social life, and fitness are more important than avoiding Covid-19, you could move to any of the states ranked 70+ on that list: Iowa, South Carolina, Oklahoma, Idaho, South Dakota, Alaska, Utah, Florida, Tennessee, Montana, North Dakota, Missouri, Arkansas, Wisconsin.

Can it make sense to move permanently in response to a temporary situation? COVID-19 will be gone soon, thanks to the vaccines, and we’ll be “back to normal”, right? My personal theory is that there is enough potential for the virus to evolve that people who want to be restricted will continue to seek restrictions going forward. I personally know quite a few people who, despite being vaccinated and/or having had actual Covid-19 (mild symptoms, but positive PCR tests) continue to be afraid to go out, wear masks even outdoors, etc.

(See also Tyler Cowen’s “Covid Has Made Where You Live Matter Even More,” Bloomberg, April 5: “Overall the Southeast would seem to be a big winner, as the psychological effects of low rates of unemployment may prove more durable than the effects of high rates of casualties.”)

It doesn’t make sense to move to a state with a state income or estate tax, however. Let’s intersect with income-tax-free states. Now we’re down to South Dakota, Alaska, Florida, and Tennessee. South Dakota is an awesome state for domestic asset protection trusts (along with Nevada, this is where America’s billionaires keep their trusts, but the ultimate protection may not work unless you live in SD or NV) and thus is a good place to preserve wealth from potential plaintiffs. It is a lovely place to spend the summer, but if you have school-age children you don’t want to be stuck there December through February. With apologies to friends in Anchorage, that goes double for Alaska! Now we’re down to Florida and Tennessee. Nashville, for example, is reasonably nice in January, with average highs of 48 degrees, but Tennessee is more of a working state than a fun/retirement state. If you’re going to move, why not move to a playground? And Miami, oddly enough, despite being much warmer in winter is actually slightly cooler in the summer than Nashville. Finally, I am not sure that the WalletHub ranking of Coronafreedom makes sense. The Tennessee governor declined the Central Tyrant job and did not order everyone to wear masks. However, unlike in Florida, where the governor forbade local tyrants from imposing mask laws with fines, the Tennessee governor simply delegated tyranny to counties: “Since the beginning of the COVID-19 pandemic, there has not been a statewide mask mandate in place in the state of Tennessee, however, local authorities were given the authority to issue mask mandates within their own jurisdictions.” A state with empowered local tyrants is not exactly free! Thus, as so many fleeing Wall Streeters have discovered, it all comes down to Florida.

This is a report on my own January/February exploration trip to Florida in the Cirrus SR20...

Covid Olympics. If you assume that masks are effective, from a practical disease transmission point of view, Florida should have roughly the same coronaplague rate as Maskachusetts. Just as in MA, people generally wear masks when inside retail stores. Just as in MA, restaurants are open and servers wear masks, but people don’t wear masks at the tables. Florida has a higher percentage of schools that are open (100% since October), but MA has enough schools open that Covid-19 can certainly spread. It is uncommon to see someone outdoors in Florida with a mask on, but #science hasn’t established that coronaplague is among outdoors. Death rate chart from the CDC, with MA in green:

The chart shows that the denial of education to urban children, wearing masks in the forest, sitting at home next to the fridge for 12 months, etc. here un Massachusetts have not resulted in a lower death rate statistic. But if you were to point this out to someone in Florida, most likely he/she/ze/they would respond with “So what? We didn’t send a team to the COVID Olympics.” The post-Covid priorities of the typical Floridian seem to be the same as the pre-Covid priorities. If he/she/ze/they has children, the priorities are ensuring that those children get a good education and a variety of mask-free fun after-school sports. If he/she/ze/they does not have children, the priorities are gathering with friends, working, staying fit, etc. (I was there in late January and few people had been vaccinated, so those over 70 would avoid crowded indoor spaces and seek to dine at outdoor tables whenever going to a restaurant.) Where someone in Massachusetts might talk about whether he or she felt “safe” [from Covid] doing something, the Floridian will simply talk about the activity itself.

Yard Signage and Bumper Stickers. Although Florida is a swing state and it is possible that a yard sign advocating for a political candidate might change the outcome of an election, yard signs occur at only 1/100th the rate of what we have in the Boston suburbs. The same goes for bumper stickers. Would you like to know whether Black Lives Matter to your neighbor? You’ll have to ask him/her/zir/them. Driving around and wondering “In this house, what do they believe?” You’ll have to knock on the door to find out unless….

Gainesville. Beautiful campus for University of Florida, but not a beautiful or vibrant town. Apparently when the smart young people graduate they go somewhere else. Particularly unsuitable for aviation enthusiasts as the (great) airport is on the opposite side of town from the nicer real estate (tucked away in suburban developments that have a minimal relationship to Gainesville). At least with respect to Covid-19, the students seem smarter than the (cowering out of personal fear) Ivy League to whom I’ve talked recently. “We’d behave differently,” one sophomore said, “if we lived with our grandparents, but we don’t. There is no reason for us to be afraid of getting the virus and we live more than 100 miles away from our older relatives. Classes are mostly remote, so the only people that we interact with are other young people who aren’t at risk.”

Guess which department has the ugliest building? Note the students hunting for shark’s teeth in a nearby park and the selfie park at the FBO.

Sarasota. Folks with kids will want to live on the mainland rather than one of the islands (great for beach access, but the traffic can be slow getting on/off for the various services and activities that kids need). The neighborhood around the Southside Elementary School is probably the most desirable, with Camino Real being the best street and anything east of the Tamiami Trail being cheaper. Overall, however, Sarasota is more geared around the retired than those of school age. Great airport shared by air carriers and general aviation, about 13 minutes from the Southside school.

The Ringling (world’s only fine art and circus museum!) and the latest condo development for oligarchs (from my friend’s boat).

View from my friend’s apartment and his neighborhood from the air on departure…

Naples. A nice walkable downtown area. Attractive architecture. World-class restaurants at Manhattan prices (if restaurants in Manhattan were open!). There are some young people in town, but they’re apparently mostly tourists. As with Sarasota, this is a place where people go to retire. Great airport, 10 minutes from downtown, that is used only for general aviation. It was so busy in late January that jets parked on the ramp were interlaced like jets in a hangar (i.e., it wouldn’t have been possible to get one out of the middle without an hour or two of tugging).

Miami. The ultimate party town now that Los Angeles and New York have locked themselves out of the running and probably even before. “I can never get any work done here,” said one of the private equity guys I was with. KTMB is the preferred airport and it is along haul from Miami Beach (nearly 40 minutes without traffic). KOPF is a little closer, but nobody seems to like it. If you aren’t going to hit the clubs and don’t have to be in the city for work, why put up with the congestion, traffic, and high real estate prices?

The Wynwood Walls (decluttered now that they’re charging $10 to get in), breakfast cereals for the Age of Coronapanic (Franken Fat, Cap’n Corn Starch, Obesie Os from Killkidds), transportation on which it would be good to get Dr. Fauci’s opinion regarding safety, and a group of #ScienceDeniers gathering at a rooftop club.

On the way out of town, the illegal-to-operate cruise ship pier:

Key West. We went there in a Cirrus Vision Jet to visit a friend who is a passionate Massachusetts Democrat and just happens to live here for 183 days per year (that way he skips on state income tax and folks other than him can pay for the bigger government that he advocates…). In such a small place I think it would be tough to find specialized teachers, coaches, doctors, etc. for the modern-day helicopter parented child. The airport has a short-ish runway (5,000′) and is monopolized, with associated monopoly rates, by Bill Gates’s Signature Flight Support (jet fuel for those as concerned as Bill G about climate change). Fun to say that you’ve been here.

Fun fact: Pan American World Airways began here. Cuba was 90 miles away, but it is getting a little closer with every $1.9 trillion government spending bill… Found the Icon A5 on the ramp at KTMB (my flight in the A5 at Oshkosh).

Wellington Aero Club. West of Palm Beach, right up against the $25 million horse barns of America’s billionaires, you can open your garage door and taxi your twin-engine turbojet out to the 4,000′ private runway (FD38). Good public schools. Great country club for golf and tennis next door. I had a nice time here visiting a friend whose wife is a serious horse rider, but I wouldn’t want to be this far from the beach (30-40 minutes, depending on the specific beach). (See “How a Sleepy Florida Town Became the Horse Riding Capital of the World” and the 30-horse single-family stable below) My friend in Wellington (also a

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Why aren’t Florida schools run from 11-5:30?

Happy First Day of Spring!

In Florida, though, it will feel more like what we in Maskachusetts call “summer”. This gives rise to the dumbest question you will hear all season…

Elementary school in Miami is 8:35 am to 3:05 pm. Given that school buildings are air-conditioned, why not run the schools from 11-5:30 so that the kids can do outdoor stuff during the comparatively cool morning?

Instead of children running around on a soccer field during the hottest time of day, they could be enjoying sports during the most comfortable time of day and enjoying taxpayer-funded A/C during the hottest hours.

Obviously this is a bad idea, but why?

An iPhone snapshot from the Cirrus SR20, flying up the Miami Beach shoreline in January 2021. This proves my hedge fund manager friend’s adage regarding how it is impossible to lose money on a real estate investment: “They’re not making any more condos.”

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