As we all know (at least if you listen to Nancy Pelosi, MSNBC or most of the CNN staff) the new Republican tax plan will mean the end of civilization. Bees are buzzing in their hives as they prepare for the next evolutionary leap forward, replacing us as the dominant lifeform on the planet. But even if none of those things happen, some anecdotal evidence indicates that a combination of certain changes in the tax code and the crushing burden imposed on New York City residents by the state and municipal governments may finally be driving some of the wealthier denizens of the Big Apple out of the region. As Western Journal reports, financial planners are seeing a spike in clients asking just how feasible it would be to get out while the getting is good.
Wealthy New York City elites are preparing to flee the state because the Republican tax bill is going to make them face the full brunt of Mayor Bill de Blasio and Democrat state leadership’s tax rates.
“Everybody I speak to brings this up. Every NYC resident I speak to asks about the feasibility involved in doing it,” Wall Street tax expert Robert Willens told Yahoo Finance.
“I’ve been doing this more than 40 years, and never heard more discussion about relocating than recently.”
Wealthy New Yorkers can currently lower their federal taxable income by more than $100,000 through a provision of the tax code known as the State and Local Tax Deduction, or SALT.
To be clear, part of what is prompting these questions is absolutely the “fault” of some of the changes in the new tax plan. Up until now, all New Yorkers were able to claim their state taxes as a deduction on their federal taxes, softening the blow considerably. And it’s a significant blow to be sure because the combined tax burden for New York City residents is the highest in the nation, even higher than that in Taxachusettes. This meant that wealthy New Yorkers could shield themselves to the tune of more than $100K in state and municipal taxes.
But under the new tax plan, the cap will fall at $10K. If you happen to be of more modest means and earn less than $100K per year, your state and city taxes aren’t going to be that high so you’ll still be covered. The very wealthy, however, pay significantly more. The average SALT (State and Local Tax) deduction in Gotham is $60K with some paying far, far more. Those are the people who will suddenly be open to a loss on tax day which will take a very serious bite out of their designer wallets and purses. (Wait… didn’t Chuck Schumer tell me that this plan was a gift to the wealthy but a burden for the middle class? I’m so confused!)
I happen to be a fan of capitalism and have no desire to eat the rich since I’ve always hoped to become one of them myself. From that perspective, I’m certainly not happy to see this burden land in their laps. But at the same time, the real problem here wasn’t created by the changes coming with the new GOP tax plan. What we’re seeing is the exposure of the massive, Democrat-driven tax burden on New Yorkers which had previously been disguised by a tax policy which allowed them to shove that burden off on the federal level.
If New Yorkers had been forced to actually pay all of these taxes themselves all along, they might not have gone along with Democratic pipe dreams for so many years. That’s how the New York tax burden was able to become so massive to begin with. Who knows? With this stiff dose of reality, perhaps rather than fleeing the city or the state, the successful will be more prone to reject the tax and spend policies of the Democrats and try something new.