BLOG

Millionaires: Florida Beats New York

By Thomas J. Stanley on Apr 12th, 2012 in Current Events

State death taxes are economically self defeating because tax return data confirm that the wealthy in America often arrange to die tax free in states like Florida and Texas.


So says an editorial in The Wall Street Journal.  The editorial cites the research on this topic conducted by economist Arthur Laffer.  Much of the discussion focuses on the adverse effect that high gift and death taxes has upon the geographical mobility of wealthy households and businesses headed by the affluent.


“Tennessee is one of only two states that imposes an estate and gift tax.   . . .with a gift and dealth tax rate that reaches 9.5% a Tennesseean with a $5M estate would pay $462,000 more estate tax than someone living in the . . . states with no such tax such as Florida.   The Tennessee tax really does cause the rich to flee.”  [see WSJ article]


I haven’t spent a lot of time looking at the estate returns for Tennessee, but I have followed the affluent market characteristics of both New York and Florida since early in my career.  It’s obvious to me that, in terms of market share, New York State has been bleeding millionaires for more than two decades.  In 1987, for example, I estimated that the state of New York accounted for approximately 9.4% of all millionaire households.  At the same time, Florida had just under 4.7%.  But 20 years later I crunched the IRS’s data for estates with a gross value of $2M or more.  I recognize that the milllionaire household measure for 1987 is not identical to the 2007 millionaire estate measure, but they are close.   According to my calculations, in 2007, nearly 9.3% of all of these estates were from Florida residents.   That is about double what it was in 1987.  New York’s market share declined to approximately 7.5%. 


Unlike Florida, New York has a sizable estate tax and income tax.  Plus New York City has its own income tax.  Increasing the tax burden on the so-called rich often produces results that lawmakers don’t anticipate.  The wealthy have options.  As demonstrated many of them can move their households and their businesses to state environments where being wealthy is not penalized or even out of the USA.  Then the affluent who remain in these oppressive tax states will be called upon to give a greater and greater percentage of their wealth and income to the state coffers. 


This inevitable process is not something new.  It has been played out in a variety of economies since biblical times.  This is akin to the cuckoo bird.  Do you live in a state that is run by a cuckoo bird?  The cuckoo puts its greatest resources, its eggs, in other nests.  Castro is a good example of a cuckoo.  He put much of Cuba’s most productive segment of the population, self employed business owners and professionals, into the nest of the American economy.  And the American economy is better for it.  So if states that have oppressively high estate taxes [a special form of wealth confiscation] don’t want to lose any more of their most productive citizens, they need to abolish the death tax.

5 responses to “Millionaires: Florida Beats New York”

  1. Nan says:

    Excellent post. In addition to losing their most productive citizens, local and state economies may also miss out on the economic stimulus from settled estates. Estate plans and giving are often focused on the groups or organizations that mattered most in their owner’s lives – which are often local! Major gifting can make a huge difference for an organization, and can provide jobs (gift specific, construction, etc.) and additional community services. State government would definitely be wise to take a second look!

  2. Cor Aquilonis says:

    So, if I understand this post correctly, millionaires are moving from New York to Florida because of the estate tax. It’s not because, oh, I don’t know, millionaires are (on average) older individuals who would be attracted to a nationally renowned retirement destination with a generally wonderful climate and tons of amenities? You did control for that in your research, right?

    BTW – nice move with the manipulative use of the term “death tax” Mr. Frank Luntz. How about we call it what it is: “Estate Tax.”

  3. Wizard Prang says:

    This is a basic truth that the “tax-the-rich” mob forget or ignore: the rich have the ability to LEAVE.

  4. Brian Van_D says:

    Cor, did Florida not have a “wonderful climate” in 1987? I know you like to throw stones on this blog, but please think a bit harder next time.

  5. Bonhomme Richard says:

    Am I the only one who’s noticed Debbie Downer is posting under a pseudonym throughout the blog? The constant negativity and victim mentality would be a laugh, except for when the weather is fair, and they vote.

    If the FL migration is weather related, why are the wealthiest the most mobile group, and why is there migration from NY and NJ (the other state with both estate and inheritance taxes) to colder climes like North Dakota?

    I was one. Started out in a lower middle class family in an area where few went to college or moved from town, decided a year or two into employment to escape NJ asap – net worth near zero, but big ambitions – a plan and discipline. No hand out for OPM, or crying about my rotten luck. I never felt deprived, but laugh at what the whiners always considered necessities owed to them that the rich do without in order to save. I did leave NJ within a decade, certainly not driven by weather for my “old bones”, and with several decades left to earn the next millions. My only regret, not moving from the redistribution state earlier.

Leave a Reply

Your email address will not be published. Required fields are marked *