Paul L. Caron

Monday, February 3, 2020

WSJ: 2017 Tax Law Is Causing An Exodus Of People From High-Tax States

Wall Street Journal, So Long, California? Goodbye, Texas? Taxpayers Decide Some States Aren’t Worth It:

WSJTwo years after President Trump signed the tax law, its effects are rippling through local economies and housing markets, pushing some people to move from high-tax states where they have long lived. ... 

Many people saw their overall taxes go down after the 2017 law was passed. But the law had two main changes making it tougher to live in high-cost, high-tax states, especially compared with lower-taxed options. It essentially curbed how much homeowners can subtract from their federal taxes for paying local property and income taxes, by capping the state and local tax deduction at $10,000. It also lowered the size of mortgages for which new buyers can deduct the interest, to $750,000 from $1 million.

These changes have the biggest impact on a sliver of the population who have high incomes and live in expensive areas. They tend to have white-collar jobs and the ability to pick up and move. Many own their own businesses, work remotely or are nearing retirement. ...

In the 10 states that typically have the highest property taxes and mortgage interest amounts [California, Connecticut, Hawaii, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Washington], home-price growth dropped right after the tax law passed, according to an analysis by Fitch Ratings.

Home-price growth held steady for the 10 states that typically have the lowest property taxes and mortgage-interest amounts [Alabama, Arkansas, Indiana, Kentucky, Louisiana, Oklahoma, Mississippi, Missouri, Tennessee, and West Virginia]. ...

The dynamic is affecting even states typically thought to have low taxes. Mauricio Navarro and his family left Texas last year for Weston, Fla. Neither state collects its own income tax, but Mr. Navarro was paying more than $25,000 annually in property taxes in the Houston area, he said. Texas ranks among the states with the highest share of taxpayers who pay more than $10,000 in property taxes, according to the National Association of Home Builders.

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Tom Steyer posted his 2018 tax returns. He lost $26M in SALT deductions. His AGI went up by 23% so he is benefiting handsomely from DJT's economy but he's paying a higher tax rate. Which, by the way, is still lower than Warren Buffet's secretary.

Posted by: DanJ1 | Feb 3, 2020 1:32:37 PM

That’s awesome. We should do this right before every census going forward.

Posted by: Anon | Feb 4, 2020 5:27:50 PM

The notion that a slowdown in home-price growth is tied to an exodus in people leaving the state is perhaps the flimsiest "irrelevant correlation IS causation" reasoning I've seen from the WSJ. If you read the article the inevitable conclusion is that people are leaving their 21st century careers in SF, NYC, and Boston to do what, exactly, in WV, Arkansas, etc? Give me a break with this nonsense. If WSJ actually believed this pap they would have relocated and rebranded themselves the Wheeling Street Journal. And yet for all of their strident, shrieking anti-tax crusade... they remain in NY. Their executives remain in NY/CT/NJ. Actions speak louder than words.

Posted by: Unemployed Northeastern | Feb 7, 2020 10:34:08 AM