Tags: california | millionaire | tax | moving

Double Tax Rate Bump Pressures Calif. Millionaires

By    |   Thursday, 07 Feb 2013 10:21 AM

Millionaires in California are getting soaked by sky-high income taxes and other states are trying to capitalize on their outrage, the New York Times reports.

Starting this year, high income residents will fork over more than half of their earnings exceeding $1 million to the California and federal governments.

The combined 51.9 percent rate is the stiffest in the nation; California's top rate alone is 13.3 percent, higher than any other state's and higher than it has been in 70 years, according to the Times.

New York and Hawaii are in second and third place, respectively. Seven states have no personal income tax.

“It’s definitely the highest in the United States,” David Kline of the California Taxpayers Association told the Times. “What we like to point out to people is that there are states with absolutely no personal income tax. So if you moved from California to Florida, and you are in a high-income bracket, you are automatically giving yourself a 13.3 percent raise.”

A handful of high-profile big earners have expressed their frustrations at having to pony-up hefty sums to Washington and Sacramento.

Just last month, professional golfer Phil Mickelson vented at a news conference, suggesting that he might move to another state to lower his tax bill.

Mickelson, 42, puts his overall rate at "62, 63 percent" when he includes disability, unemployment, and Social Security payments. Last year, he made roughly $45 million both on and off the greens, according to Golf Digest's annual survey of top earners.

No sooner had Mickelson spouted off than Texas Gov. Rick Perry invited him to put down stakes in the Lone Star State, which has no income tax.

"Hey Phil . . . Texas is home to liberty and low taxes . . . we would love to have you as well!!" tweeted Perry, a Republican.

This week, Texas began a radio ad campaign in California touting its favorable tax climate — especially for employers. “I have a message for California business: Come check out Texas,” Perry says.

California Gov. Jerry Brown pushed for the state tax hike and is confident that the wealthy consider more than just taxes when they're deciding where to move or build a factory.

“People invest their money where these big things have occurred,” Brown said at a news conference. “The ideas, the structures, the climate, the opportunity is right here on the Pacific Rim.”

A study by Stanford University's Center on Poverty and Inequality supports Brown's contention that the tax rates don't heavily influence where millionaires decide to live.

The study's author, assistant sociology professor Cristobal Young, told the Times that he thinks millionaires will simply figure out how to pay less in taxes, either through loopholes or working less, rather than move.

“I suspect the accountants are busier this year, but I don’t think the moving companies are getting a boost,” Young said. “Moving to Nevada or Texas or Florida is a very big life change, and means leaving behind family, friends, colleagues, and business connections.”

Still, economist Bradley Schiller, who teaches at University of Nevada in Reno, said tax rates can't be counted out as "a very important part of the equation" for the wealthy when considering where to live.

"If you are talking about an income tax of 13 percent on a millionaire in California and an income tax rate of zero percent on a millionaire in Nevada, to argue that it doesn’t affect a millionaire’s location decision is to say all millionaires must be stupid," he told the Times.


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Millionaires in California are getting soaked by sky-high income taxes and other states are trying to capitalize on their outrage.
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2013-21-07
Thursday, 07 Feb 2013 10:21 AM
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