Several states are working to progressively tax exiting residents in order to put a dent in their budget deficits. If you find yourself trapped and it is becoming too expensive to leave, how can you afford to stay in such a high tax environment?
New & Rising Exit Taxes
HI, MN, MD, CT, NY, and CA are among the states which have been increasingly pushing for new or more extreme exit taxes on residents who try to leave for lower income states.
California in particular is looking to lower the threshold on income for residents who can be chased after they leave. With the intent to tax them for years after they move to other states.
Of course, NY has already had its own version of this to make up for all the money being lost by the residents and businesses it has been chasing away. As well as new and higher real estate transfer taxes. Which are effectively another form of exit tax.
This not only seems to be kicking property owners while they are down, and are already struggling with a nose diving property market, but by any common sense measure seems counterintuitive, and counterproductive. If people are leaving and your state is going broke because of your high taxes, common sense says that you would reverse that, instead of doubling down on it. If your fingers hurt because they are on fire, you don’t throw your whole body into the fire to make things better, right?
Record Deficits Vs. Record Budget Surpluses
This is not about politics. It is about basic elementary school math.
Bloomberg predicts NY’s budget deficit will grow to over $6B within the next three years if the state stays on this path. California already has a budget deficit of almost $23B. Largely due to fleeing businesses that are no longer paying property taxes.
Contrast this to where movers are going to for lower taxes. A record number of New Yorkers again left for places like Florida last year. Florida now has a budget surplus of $22B.Texas, which has been a popular haven for fleeing Californians, boasts an expected $33B surplus for this year.
Sheltering In Place & Minimizing Your Taxes
If it has become too expensive to leave, how do you stay in place and manage it financially?
For many, taking unemployment and all of the benefits that come with it almost seems to make more financial sense than trying to find a new job after being laid off.
Those with retirement funds may take hardship withdrawals to pay their soaring tax bills.
If it is possible to sell your property, you may choose to rent instead of buy and own. Just make sure you lease in rent controlled unit.
Another option is to shift income to less taxable methods. Such as investment income, or spending more time offshore each year to legally avoid and minimize federal income taxes.
Challenge Your Property Tax Bill
The number one thing you can do right now to reduce your expenses and taxes in NY is to challenge and get your property tax assessment reduced. Make sure this is on top of your to do list.