May 2, 2018 2,328 Views Servicers Navigate the Post-Pandemic World 2 days ago Servicers Navigate the Post-Pandemic World 2 days ago The Week Ahead: Nearing the Forbearance Exit 2 days ago Demand Propels Home Prices Upward 2 days ago The Best Markets For Residential Property Investors 2 days ago David Wharton, Managing Editor at the Five Star Institute, is a graduate of the University of Texas at Arlington, where he received his B.A. in English and minored in Journalism. Wharton has over 16 years’ experience in journalism and previously worked at Thomson Reuters, a multinational mass media and information firm, as Associate Content Editor, focusing on producing media content related to tax and accounting principles and government rules and regulations for accounting professionals. Wharton has an extensive and diversified portfolio of freelance material, with published contributions in both online and print media publications. Wharton and his family currently reside in Arlington, Texas. He can be reached at [email protected] income tax migration salt deduction state and local taxes Tax Reform 2018-05-02 David Wharton Share Save Demand Propels Home Prices Upward 2 days ago About Author: David Wharton Previous: Housing Trends Snapshot Next: Ocwen Reports Q1 2018 Earnings, Highlights Debt Forgiveness Governmental Measures Target Expanded Access to Affordable Housing 2 days ago Home / Daily Dose / Will Tax Reform Drive Migration in Years to Come? Governmental Measures Target Expanded Access to Affordable Housing 2 days ago Related Articles Print This Post Data Provider Black Knight to Acquire Top of Mind 2 days ago While many are already examining the near-term effects of the tax reform passed a few months ago, could it have larger implications for where people choose to live in the long run? In a recent Wall Street Journal op-ed, a pair of economists posits that changes instituted by the tax reform bill will ultimately drive millions of people out of blue states such as California and New York and into low-tax red states.As economists Arthur B. Laffer and Stephen Moore, authors of the annual “Rich States, Poor States” report published by the American Legislative Exchange Council, explain, this migration from high-tax states to low-tax states is nothing new, but they argue that the tax reform bill—and specifically its cap on SALT deductions—is likely to accelerate this trend. According to Laffer and Moore, “The losers will be most of the Northeast, along with California. The winners are likely to be states like Arizona, Nevada, Tennessee, Texas, and Utah.”According to Laffer and Moore’s “Rich States, Poor States” report, around 3.5 million Americans have relocated from the highest-tax states to the lowest-tax ones over the past decade. Since 2007, the report finds that Texas and Florida (states that do not have an income tax) have seen an influx of 1.4 million and 850,000 residents, respectively. California and New York have lost more than 2.2 million residents combined within that same period.Laffer and Moore say that, based on an analysis of IRS record for that decade, “Texas and Florida have gained a net $50 billion in income and purchasing power from other states, while California and New York have surrendered a net $23 billion.” The tax reform bill capped SALT deductions at $10,000 per family, which could mean a significant tax increase for high earners in higher-taxed states, according to the economists. “Consider what this means if you’re a high-income earner in Silicon Valley or Hollywood,” states the op-ed. “The top tax rate that you actually pay just jumped from about 8.5 percent to 13 percent. Similar figures hold if you live in Manhattan, once New York City’s income tax is factored in. If you earn $10 million or more, your taxes might increase a whopping 50 percent.”Laffer and Moore estimate that the lowering of the SALT deductions will result in California and New York losing around 800,000 residents, on net, during the next three years. They expect Connecticut, New Jersey, and Minnesota to lose around 500,000 residents combined during that period as well.Of course, the tax issue will be more of a problem for some economic tiers than for others. Nor are tax rates the only factor driving migration. A November 2017 Redfin study found that residential construction was a major driver of intercity and interstate migration—not surprising, given that many American markets are suffering from not only skyrocketing home prices but also insufficient housing inventories. Like the movie said: if you build it, they will come.If the taxes are lower, Laffer and Moore believe that they’ll come in droves. If so, that large-scale migration will undoubtedly have major impacts on the housing markets involved. Especially given that many markets in California, for instance, are already facing severe housing crises due to affordability and inventory issues. Higher taxes might just be the extra push some homeowners need to decide to relocate. Tagged with: income tax migration salt deduction state and local taxes Tax Reform Data Provider Black Knight to Acquire Top of Mind 2 days ago Will Tax Reform Drive Migration in Years to Come? The Best Markets For Residential Property Investors 2 days ago in Daily Dose, Featured, Government, Journal, Market Studies, News Sign up for DS News Daily Subscribe
Will Tax Reform Drive Migration in Years to Come?