Miami Welcomes the Rich Fleeing High-Tax StatesOctober 12, 2018
More than a century ago, in 1913, the government was introducing a deduction in its tax system that allowed the reduction of taxes paid, at the state and municipal levels, when paying the taxes demanded by the Federal Treasury. However, in December of 2017, the Senate passed a tax bill that would change this rule that was benefiting taxpayers in territories with higher taxes.
What did that mean to Florida? Since then, the estate is receiving many investors – fleeing from states such as New York, Connecticut, and even California -, with open arms, breathtaking ocean views, and competitive real estate prices.
“You look at recent sales on Miami Beach, and it’s clear what is happening,” says Julian Johnston, luxury real estate broker and owner of Calibre Realty. “The Silicon Valley guys are coming, the New York hedge fund guys are coming, and they all want new construction, a minimum of six or seven bedrooms, and don’t even blink at a $17 million starting point.”
Todd Michael Glaser, a Miami based Developer, who collaborated with plenty of architects and developers, agrees. “There’s clearly a migration plan in place, and with the super wealthy sick of paying state taxes, it’s easy for them to unwind their lives and move.” Glaser’s only gripe: “Unfortunately there’s no inventory [on Miami Beach] in the $50 million to $100 million range.” Nothing to worry about, since the new Floridians have found a way to make a $20 million house a home.
Hedge fund billionaires relocating to Florida for tax reasons is nothing new, with marquee names like David Tepper, Paul Tudor Jones and Eddie Lampert moving in recent years. The latest additions include the hedge fund giant Moore Capital Management, that manages $10.2 billion in assets, which is opening a Miami office next year. Also, two of the founders of I Squared Capital, Sadek Wahba, and Adil Rahmathulla, already made the move to Magic City.
In an interview to CNBC, economists Arthur Laffer and Stephen Moore predicted a new mass exodus of wealth from New York and California because of the new tax law. “In years to come, millions of people, thousands of businesses and tens of billions of dollars of net income will flee high-tax blue states for low-tax red states,” they said. They calculate that about 800,000 people will move from New York and California over the next three years. New Jersey, Connecticut, and Minnesota will lose a combined 500,000 people over the same period.
With information from Bloomberg and Ocean Drive