Tax Changes Could Lead to Northeastern Client Exodus
Financial advisors whose high-earning clients live in such high-tax states as New York and Connecticut could soon be fielding questions about relocation now that both the House and the Senate have passed the tax overhaul bill. The GOP’s bill in both chambers includes the elimination of state and local tax deductions, and this could increase the tax liability of high earners by tens of thousands of dollars, Bloomberg writes.
Someone making a salary of $1 million a year, for example, would see their taxes go up by $21,000 as a result of the elimination of these deductions, according to analysis by accounting firm Marcum LLP cited by the news service. Those earning $1 million from investing, meanwhile, would have their taxes go up by $14,000, according to Marcum.
Goldman Sachs estimates that up to 4% of New York’s high earners could leave the city were the GOP’s bill to be enacted, Bloomberg writes. Meanwhile states which have no state income tax, such as Florida, could see an influx of high earners, according to the news service. Jeff Miller, director of luxury sales for Brown Harris Stevens for the Miami area, tells Bloomberg he’s already had calls from half a dozen clients concerned about higher taxes who want to ramp up their search for property in the state.
On the other hand, the proposed tax change is probably not enough for high earners to “uproot” the family, find new schools for their children and leave behind their friends, David Silver, a senior manager at accounting firm MBAF, tells the news service.
Abolishing state and local tax deductions could bring in an estimated $1.3 trillion in taxes to federal coffers, according to Bloomberg. Among the 13 Republicans who voted against the House bill, nine were from high-tax states. But Senate Republicans were able to pass their version of the bill Friday with just one dissenting vote from their own ranks and all Democrats voting against it. Nonetheless, because of differences between the two bills, such as variations in the top individual tax rate, estate tax repeal details and expiration dates of credits and tax cuts, a conference committee drawn from both the House and the Senate will need to hash out an accord prior to final passage, according to the Wall Street Journal.