High-Tax States Make It Hard for Wealthy Residents to Leave
By Ben Steverman
This tax season, many wealthy Americans are getting an expensive jolt.
The Republican tax overhaul signed by President Donald Trump more than a year ago provides plenty of perks for the rich. But not all well-off folks are treated alike under the new law. A controversial provision that helps pay for huge corporate tax cuts punishes residents of states with higher income taxes—most of which, but not all, lean Democratic.
By setting a $10,000 cap on how much Americans can deduct in state and local taxes, or SALT for short, Washington created a pricey problem for the privileged in some parts of the country. Now that the first tax season under the overhaul is here, that reality is hitting home—and the thought of moving to a low-tax state may suddenly look more attractive.
But even before the law, there were rich people in blue states trying this strategy. Some actually moved, while some just pretended to—and that’s where state tax auditors come in. Officials in places such as California and New York don’t make it easy for the rich to say goodbye, with investigators who dig deep, forcing residents to prove they really have cut ties in favor of cheaper pastures.
“You have to abandon the old and establish the new,” said Karen Tenenbaum, a New York lawyer who specializes in residency disputes. “The more ties you cut, the better—auditors like to see a moving van and an itemized list of what was moved.”