Recently, I learned four different friends are doing something that will save each of them tens of thousands – or even hundreds of thousands of dollars each year. They’re moving. And they’re not the only ones. Many of the smartest guys I know are moving this year. They’re not just thinking about moving; they’re not saying
“Maybe someday”, they are doing it right now.
The reason why is the amazing part, as you’ll see. And it might make sense for you to consider moving too. Let me explain.
I spoke with a friend on the phone last week. “What are you doing in Washington State?” I asked him. “I’m moving here,” he said. “I love California. But moving to Washington State saves me $133,000 a year in state taxes on every $1 million I earn.”
This is not just a millionaire thing. In Oregon, for example, if you make more than $7,750 in a year, your state income tax rate is 9%. (If you make more than $125,000, it is 10.8%).
Just this weekend, a friend of mine from Oregon came to visit me in Florida. He had a busy schedule – with realtors. He and his wife are planning to leave Oregon. They may move to Washington State or to Florida. They actually have very few ties to Florida, but the state income tax rate is zero. It would be like getting a 10% plus raise.
State governors don’t believe that people move out of states for tax reasons. But they do! Maryland’s governor learned the hard way.
In 2008, roughly 3,000 people in Maryland had incomes over $1 million. To bring in more money, Maryland’s governor created a “millionaire’s tax bracket.” One year later, it brought in less money because one third of the millionaires disappeared from Maryland’s tax rolls.
It looks like California is about to learn the same lesson. California’s government raised its highest tax rate to 13.3% for 2013. The state thinks this approach will bring in more money but judging by my friends, it looks like it’s going to backfire.
We’ve finally hit the point where people are crying “uncle.” Everyone from ballplayers to Hollywood types are realizing that getting a new mailbox (so to speak) in a state that doesn’t levy state income taxes will save them $133,000 on every $1 million they earn.
Governor Rick Perry is inviting Californians to his no-income-tax sate of Texas. He took out a radio ad in California, which seems to have irritated the heck out of California’s Governor Jerry Brown.
Brown’s point is “Why would anyone want to leave California to go to Texas?” The answer is simply taxes.
The smartest guys I know are moving. It’s not because they want to – it’s because their states are forcing them to, through high state income taxes. It might make sense for you to get a new mailbox, too and yourself $10,000 or more a year because of it. It’s not a bad deal if you can swing it. Move to a place like sunny Florida or Washington State and get a big raise. Do the math and maybe you’ll end up following my friends’ leads.
A version of this article first appeared on February 12, 2012 in the Daily Wealth, published by Stansberry & Associates Investment Research, an independent investment research firm. You can visit them at www.stansberryresearch.com.