Trump’s SALT Change Isn't Causing People to Flee New York, Says Moody's
Trump’s SALT Change Isn't Causing People to Flee New York, Says Moody's
(Bloomberg) -- A new limit on state and local tax deductions isn’t forcing taxpayers to leave New York, New Jersey and California despite claims from some Democratic politicians that the federal tax overhaul is causing a mass exodus of wealthy residents, according to Moody’s Investor Service.
“Migration from high-tax states is lower than a decade ago and generally following the U.S. as a whole, while many people are moving from one high-tax state to another," according to the research led by Moody’s vice president and senior credit officer Marcia Van Wagner. “Jobs and demographic trends will continue to influence relocation patterns more than tax burdens.”
Migration rates in the five high-tax states most affected by SALT -- California, Connecticut, Maryland, New Jersey and New York -- are generally in line with U.S. trends, according to the report released Monday. The data also suggests that people who leave high tax states aren’t necessarily doing so for tax reasons. The most popular destination for people leaving New Jersey and Connecticut is New York, according to Moody’s.
The 2017 Republican tax law capped at $10,000 the amount of state and local tax, or SALT, people can deduct from their federal liabilities. The deduction, which was previously unlimited for some taxpayers, have prompted Democrats to say President Donald Trump targeted mostly Democratic states to pay for his $1.5 trillion tax cut bill. A group of congressional Democrats is working on legislation to make the deduction more generous, though it’s unlikely to become law anytime soon.
Most vocal of the SALT-cap critics is New York Governor Andrew Cuomo, who has said the law’s change is causing his state to collect far less revenue because many top earners, who make up much of the tax base, are leaving to go to low-tax states, such as Florida.
“At one point people say ‘I can’t afford this cost of living and I can move to another state,”’ Cuomo said March 11. “I’m afraid we’re at that tipping point. I’m afraid that’s why we see the decline in revenues. There is nothing more serious than this.’’
Florida is the most popular destination for New Yorkers who do move, but taxes are not the prime driver, according to Moody’s. Jobs, climate and housing costs are the primary considerations, the report said.
“We have not seen many people who have actually acted on leaving,” said Joseph Perry, tax and business services leader at accounting firm Marcum, said about Cuomo’s statements. “Clients want to stay. They love the city and the tipping point hasn’t happened yet.”
To contact the reporters on this story: Laura Davison in Washington at ldavison4@bloomberg.net;Henry Goldman in New York at hgoldman@bloomberg.net
To contact the editors responsible for this story: Wendy Benjaminson at wbenjaminson@bloomberg.net, Bill Faries
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