Category: Taxation and Estate Planning

Washington State’s new income tax and Florida’s new billionaire resident

by philg

We are informed that Floridians are crushed under the boot of a fascist dictatorship. See, for example, “Ron DeSantis Is All In—on Creating an American Autocracy” (Mother Jones):

His plan to outflank Trump would scale up the calculated system of repression he designed in Florida. …To stifle dissent, in 2021 DeSantis signed a law that would ramp up penalties for rioting but that civil rights groups warned would ensnare peaceful protesters [what about mostly peaceful protesters?]; this spring he pushed legislation to unleash speech-­chilling lawsuits against news outlets.

DeSantis, like other distrustful autocrats, keeps a tight circle of advisers, including his wife.

One way DeSantis has created space to operate is by hollowing out state government, filling key posts with donors and loyalists—the academic term is “autocratic capture”—perhaps most notably on the state Board of Medicine, which has supported his agenda to put new limits on gender-affirming care.

Nobody would live in Florida, in other words, unless he/she/ze/they has no other option, e.g., is incarcerated or established in public housing that would take 10 years of waiting to get into in another state. Anyone who cherishes freedom should have driven north on I-95 in fall 2020 when DeSantis ordered public schools to reopen and refused to permit county and local officials to order lockdowns, masks, and vaccine injections.

In Latinx migrant suffers from fascism and tyranny imposed by Governor Ron DeSantis, we looked at Lionel Messi apparently having no other choice for where to live. This month, the victim of tyranny is Jeff Bezos. “Jeff Bezos Says He Is Leaving Seattle for Miami” is the typically thorough New York Times article:

Mr. Bezos, 59, announced his move in an Instagram post on Thursday night. He said his parents had recently moved back to Miami, where he attended high school, and that he wanted to be closer to them and to his partner, Lauren Sánchez.

Another factor, he said, was that operations for his rocket company, Blue Origin, are increasingly shifting to Cape Canaveral, Fla., just over 200 miles by road north of Miami along the state’s Atlantic coast.

Bloomberg News reported last month that Mr. Bezos had purchased a mansion in South Florida for $79 million, a few months after buying a neighboring one for $68 million. Mr. Bezos is worth $161 billion, making him the world’s third-richest person, according to Bloomberg.

Mr. Bezos said in his Instagram post that he had “amazing memories” of Seattle and had lived there longer than anywhere else. “As exciting as the move is, it’s an emotional decision for me,” he wrote. “Seattle, you will always have a piece of my heart.”

The fearless journalists uncritically accepted the “emotional” explanation and did not include the word “tax” anywhere in the article. What’s new in Washington State, historically a state that was free from any personal income tax? A 7 percent income tax on long-term capital gains (wa.gov), starting in 2022:

The 2021 Washington State Legislature recently passed ESSB 5096 (RCW 82.87) which creates a 7% tax on the sale or exchange of long-term capital assets such as stocks, bonds, business interests, or other investments and tangible assets.

This tax only applies to individuals. However, individuals can be liable for the tax because of their ownership interest in a pass-through or disregarded entity that sells or exchanges long-term capital assets. The tax only applies to gains allocated to Washington state.

Washington State also imposes a death tax of 20 percent on residents who were successful in life. Florida’s constitution bars both income and estate taxes.

Even if the new tax was not a factor in Bezos’s decision to move to Miami, the move will have a big impact on how much revenue the Covidcrats of Washington State will collect from the new tax and, therefore, what they can spend on social justice initiatives (“The Democratic Party controls the offices of governor, secretary of state, attorney general, and both chambers of the state legislature” (source)). It seems like a failure of what we used to call journalism that the New York Times didn’t mention the dramatic changes in the Washington State taxation landscape (first the new tax and second the moving out of the biggest taxpayer).

Related:

  • Effect on children’s wealth when parents move to Florida (a calculation that kids can be about 40 percent richer if parents move from Massachusetts, who tax rates are actually lower than Washington’s)
  • Back in 2021, the state held a public hearing on House Bill 1406, which concerns a proposed Washington state wealth tax, Sen. Noel Frame, D-Seattle remarked at that hearing that there is a “really pessimistic view of the world to just assume someone would leave [Washington state].” “These are folks who have been deeply invested in our community,” (source)
  • The Myth of Millionaire Tax Flight, by Cornell sociologist Cristobal Young, pointing out that rich people won’t move in response to higher state taxes
  • “Lessons from Washington State’s New Capital Gains Tax” (by Kamau Chege; The Urbanist, June 2023): Taxing the rich works like a charm. … For decades, the wealthiest Washingtonians have gotten out of paying what they truly owe in state and local taxes. … One of the first lessons is that our state’s richest residents are much, much richer than we understood — and they are continuing to get richer at a faster rate than previously assumed. … working people know that private wealth is built on public infrastructure and public investments paid for by all of us — especially low-income folks who pay more than their share in taxes. … the richest people in our state, like Jeff Bezos and Bill Gates, have armies of accountants working to find tax loopholes and write-offs.
  • “Capital Gains and Tax ‘Fairness’” (Editorial Board; WSJ, 2021): “The Biden and Olympia tax increases on capital gains won’t matter to Bill Gates or Jeff Bezos, who are already rich and can hire lawyers to shelter their future gains.” [Maybe the WSJ envisioned that Bezos would switch to borrowing against his stock? But that doesn’t work in a high-interest-rate environment.]
  • “Victory! Bill to levy capital gains tax gets “do pass” recommendation from House Finance” (Northwest Progressive Institute, 2021): A substantial chunk of the revenue from the proposed capital gains tax would be paid by just two individuals: Bill Gates and Jeff Bezos, who are among the world’s richest men.
  • cities ranked by sunshine (move.org): 73 percent of days in Miami vs. 46 percent of days in Seattle
  • Ron Desantis’s latest outrageous position:
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New Hampshire is getting rid of its personal income tax

by philg

New Hampshire has long been wrongly considered a “tax-free” state. There was no income tax on wages and, unlike other New England states, there was no death tax. But for successful people there was always a 5% tax interest and dividends to consider. The state’s web site, however, says that this tax is being phased out by 2027:

A 5% tax is assessed on interest and dividend income. The State of New Hampshire does not have an income tax on an individual’s reported W-2 wages.

Please note, recently enacted legislation phases out the Interest and Dividends (I&D) Tax starting at 4% for taxable periods ending on or after December 31, 2023, 3% for taxable periods ending on or after December 31, 2024, 2% for taxable periods ending on or after December 31, 2025 and 1% for taxable periods ending on or after December 31, 2026. The I&D Tax is then repealed for taxable periods beginning after December 31, 2026.

Tennessee did something similar recently. Note that New Hampshire does not have a sales tax and, therefore, I think it will join Alaska as the only state that is tax-free on both income and purchases. Maybe we’re getting closer to the glorious age of a land value tax!

Related:

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Hanukkah commemorates a revolt against tax rates that we would call “low”

by philg

How is everyone’s pre-Kwanzaa candle-lighting going this week? The Righteous are showing their commitment to stopping Jew-hatred by wishing everyone a Happy Hanukkah and, oftentimes, bringing out a menorah to sit in front of next week’s kinara. This is a little strange considering that the official Hanukkah narrative concerns some Jews whose policies were similar to those we decry in Afghanistan and Iran, i.e., forcing people to obey religious laws. Maybe the unofficial narrative is even more upsetting from the point of view of of a modern American holding correct views? From a professor of history at the University of Tel Aviv, “Religious Persecution or High Taxes? The Causes of the Maccabean Revolt against Antiochus IV”:

The issues of tax increases and royal appointments to the High Priesthood arise repeatedly throughout 2 Maccabees—always in conjunction with one another, and always decried by equating royal appointments with unworthy candidates. Because of the account’s emphasis on piety, these denunciations have been discounted by modern commentators, but if we read through 2 Maccabees’ culturally-conditioned narrative codes, the argument presented is perfectly rational—and plausible. The Seleucids’ attempt to control the appointment of the Jerusalem High Priests was indeed an innovation introduced by Antiochus IV, who exploited his appointees’ weakness—their lack of dynastic legitimacy—to extort sharp tax rises from them.

Like all popular revolts in ancient times, its principal cause was the newly-imposed high taxes.

Dying in a fight against high taxes struck no symbolic and no emotional chords in Judean culture—conversely, dying for the Law did. The account of the suppression was reshaped using a narrative pattern that is well documented in Babylonian literate culture: righteous kings enforced divine law, and wicked kings violated it.

Here’s an example of a politician who promises tax increases and also commemorating a tax revolt:

The tax-and-spend House Democrats similarly want to remember when ancient people rose up against what was likely a minimal tax by our standards:

How about their counterparts in the Senate?

In short, seemingly everyone who wants to increase the percentage of the U.S. economy devoted to taxation is lighting candles and partying during this pre-Kwanzaa holiday celebrating folks who fought against a tax increase.

Meanwhile, back in my home town of Bethesda, Maryland and actually at the high school from which I dropped out, some drama:

Quite a few folks took issue with my statement that the consummate DC-insider suburb of Bethesda was primarily populated by Republicans…

Separately, who wants to bet that the author of “Jews Not Welcome” is, in fact, a Jew? The phrasing seems rather decorous for a Jew-hater. Would an actual Jew-hating Nazi (e.g., Donald Trump) say “Jews: Please don’t come to my cocktail party”? (See also “US-Israeli teen convicted of threats against Jewish centres” (BBC) for what happened when threats blamed on Trump supporters were investigated.)

Oh yes… to readers practicing Jewcraft… Happy Hanukkah!

Related:

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Italy as tax haven (living under fascism for 100,000 euro per year)

by philg

I was chatting with a Dutch friend on WhatsApp on Thanksgiving Day, reminding him that we were celebrating our theft of an entire continent from the benevolent peace-loving Earth-preserving Native Americans. I shared a photo from the morning golden retriever walk:

For his part, he shared the European perspective: “There are two ways to live life. Short and violent or long and miserable.”

What else did I learn? “The left-wing parties control Dutch cities and say that they want immigrants to Holland, but don’t want the immigrants congregating in the cities that they rule. So they’ve been trying to force immigrants to settle in the conservative country towns. That hasn’t worked because the provincial towns have refused to provide free housing for migrants. So the Hague just passed a law forcing the country towns to take these immigrants.”

What are the Dutch with money doing? “Moving to Italy,” he responded. “The Italians let foreigners who move there pay 100,000 euro per year in tax. After that you can have 100 million euro in capital gains, dividends, etc. and they won’t even ask about it. It’s actually better than moving to a Caribbean tax haven because you get rebates on all of the withholding taxes on dividends because Italy has a tax treaty with the Netherlands.” (fact check: the scheme seems to have started in 2017) He said “You have to make sure that you don’t stay more than 182 days per year in the Netherlands or have kids in school here. Like New York State chasing after people who move to Florida, the Dutch government will try to find any excuse it can to continue collecting taxes. But it is really not a hardship to live in a Tuscan villa.”

Separately, the newspapers that warned us of the fascist takeover of Italy have gone silent regarding Giorgia Meloni’s dictatorship. Based on this Reuters article, it looks like the main program of fascism is stoking inflation via bigger government:

Italy’s new right-wing government signed off on its first budget in the early hours of Tuesday, a package focusing on curbing sky-high energy bills and cutting taxes…

Next year’s budget deficit is targeted to fall to 4.5% of gross domestic product from 5.6% this year. The package is still expansionary because under an unchanged policy scenario the deficit ratio was headed for 3.4%.

The budget contains almost 35 billion euros ($35.95 billion) of increased spending or tax cuts. Some 60% to be financed through increased borrowing.

Over 21 billion euros to help firms and households pay electricity and gas bills, mainly through subsidies for energy-intensive firms and low income families.

Next year Italians will be able to draw a pension from the age of 62 provided they have paid in at least 41 years of contributions.

That compares with the current rule, put in place for just this year by the previous government, allowing people to retire at 64 provided they have worked for 38 years.

The budget also extends to 2023, with adjustments, an early retirement scheme for women. Beneficiaries will be able to draw a pension at 58 if they have at least two children, at 59 with just one child, and otherwise at 60.

So, just like Americans under transferism, the Italians under fascism are going to work less and spend more!

Related:

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Why did 1 million poor people vote against a higher tax rate for rich people in Massachusetts?

by philg

People in Maskachusetts say that they’re “progressive”. Very few earn more than $1 million per year. Why, then, did more than 1.1 million people vote “no” on a constitutional amendment that would allow the state to ding the rich (more than $1 million/year in income) at a 9% rate instead of the 5% flat rate that prevails for the peasantry?

“Massachusetts passes Ballot Question 1 (Millionaire’s tax), AP says” (MassLive):

We are informed that it is only Republicans and married white women who are so stupid that they vote against their own interests. There are hardly any Republicans in Maskachusetts and a lot of the married white women have taken advantage of the state’s no-fault divorce system to head for a profitable exit. This ballot measure should have passed by at least a 30-point margin, not a 4-point margin.

How can we explain the race being close? How could so many peasants be against rich people getting closer to paying their fair share? (which actually should be at least 13.3% because that’s what rich people in California pay for state income tax)

It can’t be because people were concerned that inflation would lift them from the old 5% bracket into the new 9% one. The text of the ballot question explains that there will be annual inflation adjustments.

Separately, this was a great outcome for the luxury real estate industry in Florida! Rich bastards will need to pull up stakes in MA before the end of December 2022 if they object to paying their fair share. (See Relocation to Florida for a family with school-age children )

Finally, the tax bump won’t be great for alimony defendants. “New Guidance on the Intersection of Alimony and Child Support” (Burns Levinson law firm, August 2022), quotes the law: “the amount of alimony should be determined with reference to the recipient spouse’s need for support to allow the spouse to maintain the lifestyle enjoyed prior to the termination of the parties’ marriage.” Alimony is now tax-free to the plaintiff and not deductible for the defendant. since most couples spend close to 100 percent of their income, the only way for a divorce plaintiff to enjoy the marital lifestyle is to collect close to 100 percent of the defendant’s income). So in setting the order, the judge has to make some assumptions about what tax rate the defendant will pay in order to figure out what the after-tax income is and make sure not to order the defendant to pay more than 100 percent of income. A high-income defendant in Massachusetts will have less after-tax income, but the court order to pay based on the old tax scheme can’t be changed without the defendant starting a “modification” lawsuit that could take years and cost $millions in fees to resolve.

Related:

  • Colorado FF, a proposition to hit those earning more than $300,000 per year with a stealth higher tax rate by reducing the deductions they can claim (it passed because lots of folks earning less than $300,000 per year voted for it!)
  • Effect on children’s wealth when parents move to Florida (kids end up about 40% richer if a parent moves south and clings to life for 30 additional years)
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Florida comes up with a scheme for increasing taxes on private workers via a property tax exemption for government workers

by philg

On the ballot this year… “Florida Amendment 3, the Additional Homestead Property Tax Exemption for Certain Public Service Workers”:

A “yes” supports authorizing the Florida State Legislature to provide an additional homestead property tax exemption on $50,000 of assessed value on property owned by certain public service workers including teachers, law enforcement officers, emergency medical personnel, active duty members of the military and Florida National Guard, and child welfare service employees.

I wonder if this will catch on nationwide as a stealth way to increase the amount of money that flows from those who aren’t part of the government to those who are. Instead of increasing property tax rates and then giving government workers a raise, which would be readily noticed, the scheme gives government workers a boost in spending power by relieving them of paying property taxes (to at least some extent). Note that this only helps government workers who are rich enough to own houses. Landlords who rent to government workers won’t get a property tax reduction so government workers who rent, like our local friend who is a police officer for a city down the coast, won’t get a rent reduction.

This could be expanded so that when government workers purchase items at retail they don’t have to pay sales tax (there is typically already a mechanism for sales tax exemption for resale, non-profit orgs, etc.).

Separately, the local police officer renter is an interesting example of someone who benefits from open borders. Without all of the crime committed in a Haitian immigrant neighborhood, the seaside city where she works wouldn’t have needed or wanted to hire additional police officers.

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NYT highlights the bright side of being poorer

by philg

This is kind of beautiful… “Inflation Adjustments Mean Lower Tax Rates for Some in 2023” (NYT):

The rapidly rising cost of food, energy and other daily staples could allow many Americans to reduce their tax bills next year, the I.R.S. confirmed on Tuesday.

Tax rates are adjusted for inflation, which in typical times means incremental movements in the thresholds for what income is taxed at what rate. But after a year that brought America’s fastest price growth in four decades, the shift in rates is far more notable: an increase of about 7 percent.

The implication of the article is that a peasant will enjoy more spending power than in 2022 because his/her/zir/their tax bill goes down (why only peasants? successful Americans are already in the top tax bracket and will stay there). But, of course, this happens only for those peasants whose real earnings went down, eroded by Bidenflation. So the peasant earns less in real terms and also pays a bit less tax, but overall should still have a lower spending power in 2023 than he/she/ze/they had in 2022.

Speaking of spending, at NBAA this week I learned that one can cut costs by renting that mid-engine sports car instead of buying:

Just don’t try to take luggage larger than a 1st grader’s backpack on your weekend getaway. An airline roll-on is at least 3X too large for the frunk (there is no trunk), making this Audio R8 useless as a transportation machine compared to a C8 Corvette.

The seat was also uncomfortable for my 6′ frame. I would be driving with knees on chest. I wouldn’t recommend anyone over 5’6″ in height spending his/her/zir/their massive 2023 tax savings on renting an Audi R8.

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Tax Day for procrastinators: big increases due to inflation

by philg

Happy Tax Day if you filed for an extension.

What’s different this year? Inflation means that ordinary schlubs can pay tax rates that were sold as applying only to the elite. The Obamacare “Net Investment Income Tax” of 3.8 percent on top of ordinary income and capital gains taxes, for example, wasn’t supposed to hit Joe Average. But what if Joe Average tried to escape the lockdowns and school closures in California by selling a house and moving to Texas? Adjusted for inflation in the real estate market, his house might not have gone up in value at all. In other words, his purchasing power from selling the house to buy a different house wouldn’t have changed (probably reduced, actually, in terms of how big a house in Austin can be purchased with the proceeds from selling a house in California). But almost surely he will have more than $250,000 in nominal gains. This is all an illusory inflation-driven “gain” and the tax code recognizes that to a small extent by excluding the first $250,000 of house price inflation. But on the rest of it, Joe will have to pay California capital gains tax, Federal capital gains tax, and an additional 3.8 percent for Obamacare. From the IRS:

The Net Investment Income Tax does not apply to any amount of gain that is excluded from gross income for regular income tax purposes. The pre-existing statutory exclusion in section 121 exempts the first $250,000 ($500,000 in the case of a married couple) of gain recognized on the sale of a principal residence from gross income for regular income tax purposes and, thus, from the NIIT.

How about a wage slave? If he/she/ze/they was earning $170,000 in 2019 and got bumped to $210,000 in 2021, his/her/zir/their spending power is actually lower due to raging inflation. Yet now he/she/ze/they is subject to the 0.9 percent Obamacare “Additional Medicare Tax” due to having income over a fixed threshold of $200,000 (soon to be the price of a Diet Coke?).

From Delray Beach, Levy and Associates:

What kind of people are paying the bill for all of the great work done by Congress and Joe Biden? From the haters at Heritage Foundation:

In 2018, due to the cruel policies of the dictator Donald Trump, the rich Americans who earned 21 percent of all income paid only 40 percent of income taxes. Separately, keep in mind that the above chart relates to cash income. A person could be in the “Bottom 50%” with $0 in W-2 income and still have a spending power and lifestyle better than someone earning $50,000 per year (in the “25%-50%” column) due to means-tested public housing, health care, SNAP/EBT, smartphone, and broadband. See “The Work versus Welfare Trade‐​Off: 2013” (CATO) for the states where being on welfare leads to a larger spending power than working at the median wage. Maskachusetts is #3 in Table 4, with welfare being worth 118% of median salary.

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Proponents of bigger government celebrate a tax-avoider (Yvon Chouinard, not Bill Gates this time)

by philg

The newspaper that says government should be bigger and that rich people should pay their fair share to fund that bigger government celebrates a billionaire who will pay essentially nothing at all in tax… “Billionaire No More: Patagonia Founder Gives Away the Company” (nytimes):

Rather than selling the company or taking it public, Mr. Chouinard, his wife and two adult children have transferred their ownership of Patagonia, valued at about $3 billion, to a specially designed trust and a nonprofit organization. They were created to preserve the company’s independence and ensure that all of its profits — some $100 million a year — are used to combat climate change and protect undeveloped land around the globe. … The trust, which will be overseen by members of the family and their closest advisers,

(“overseen by members of the family” mean that the trust can pay for almost everything that the family members might want, e.g., Gulfstream charter to Switzerland to hang out at Davos, rent a luxury apartment for a month in Paris to meet with others who are interested in climate change, etc.)

If he and his family members had sold $3 billion in shares while living in California, for example, they would have paid Federal income tax of 20%, Obamacare tax of 3.8%, and California state income tax of 13.3%. The 37.1% total rate would have yielded $1.11 billion in funding for all of the great things that Joe Biden is doing (e.g., paid for 1/500th of the student loan forgiveness scheme).

Instead, the government will get almost nothing and the money will be spent in ways over which citizens of the U.S. have no influence.

Even journalists who claim that they are experts on money seem to have some blind spots. “Patagonia Billionaire Who Gave Up Company Skirts $700 Million Tax Hit” (Bloomberg) does not consider the Obamacare and state income tax liabilities:

Still, the moves mean Chouinard won’t have to pay the federal capital gains taxes he would have owed had he sold the company, an option he said was under consideration. On a $3 billion sale, that bill could be more than $700 million. It also helps Chouinard avoid the US estate and gift tax, which is a 40% levy on large fortunes when they’re transferred to heirs.

From my 2019 Denver post, Patagonia uses backlit sidewalk billboards to inform downtown pedestrians that young good-looking American humans are facing extinction (which is why we need to bring in migrants?):

A Democrat-voting aircraft-owning friend, with the carbon footprint of an Argentinosaurus, responded to the Patagonia tax-avoidance scheme with “Loved reading that. Hurray for Chouinard”. Unless he assumes that government spending is going to be reduced, he loves that he will be paying the tax that Chouinard isn’t paying? He loves that none of the Chouinard fortune will ever be used to build a road that he can drive on to get to his airplane, a runway that he can use to take off in his airplane, or an air traffic control center that he can talk to? (admittedly much of the aviation infrastructure in the U.S. is funded separately via user fee taxes on aviation fuel and airline tickets)

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Can Black Americans get a huge discount on property tax?

by philg

“Home Appraised With a Black Owner: $472,000. With a White Owner: $750,000.” (New York Times, August 18):

Last summer, Nathan Connolly and his wife, Shani Mott, welcomed an appraiser into their house in Baltimore, hoping to take advantage of historically low interest rates and refinance their mortgage.

But 20/20 Valuations, a Maryland appraisal company, put the home’s value at $472,000, and in turn, loanDepot, a mortgage lender, denied the couple a refinance loan.

Dr. Connolly said he knew why: He, his wife and three children, aged 15, 12 and 9, are Black. A professor of history at Johns Hopkins University, Dr. Connolly is an expert on redlining and the legacy of white supremacy in American cities, and much of his research focuses on the role of race in the housing market.

Months after that first appraisal, the couple applied for another refinance loan, removed family photos and had a white male colleague — another Johns Hopkins professor — stand in for them. The second appraiser valued the house at $750,000.

The industry standard, in other words, if we are to believe the Newspaper of Science, is to apply a 37 percent discount to a Black-occupied house.

An appraised-low house is a curse if you’re the typical spend-like-a-drug-dealer American and want to pull the last dollar of home equity out to spend on bling. But an appraised-low house is a blessing if you’re faced with paying the annual property tax bill.

I’m wondering what this means for sharing out the property tax burden in the U.S. Wouldn’t most members of the laptop class eagerly grab their one Black friend to stand in for them when the local tax assessor comes buy to set the house’s value for property tax purposes? Let’s consider the appraisal discrepancy that affected Dr. Connolly, M.D., above: $278,000. At Baltimore’s 2.25 percent property tax rate, a subtraction of $278,000 in assessed value would save $62,550 over a 10-year period.

Here’s some new construction near the Stuart, Florida airport, maybe evidence that someone managed the PPP and other coronarelief programs correctly. I’m betting that he/she/ze/they would pay good money to a Black family willing to move in for a couple of hours while Martin County’s assessors try to figure out how much to hit them for.

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