Broadcast Retirement Network’s Jeffrey Snyder discusses the influence that tax rates have on where Americans live and work with Jared Dillianof Jared Dillian Money.
Jeffrey Snyder, Broadcast Retirement Network
Jared Dillian joins me this morning. Jared, great to see you. Thanks for joining us on the program this morning.
Hey, good to be here. Thank you. And I love that money is a big part of what you do in terms of your podcasting, your blogging, and I read your recent piece on reason, and I thought we’d have a great conversation about taxes.
So let me just back up and just ask you a baseline question. Do taxes shape where Americans live versus one state versus another?
Jared Dillian, Jared Dillian Money
100%. Absolutely. I mean, obviously, there’s a bunch of factors that go into determining where people live.
In California, the weather is awesome. In New York, the weather is terrible, right? So the weather is a factor.
Also, culture, nightlife, restaurants, proximity to friends and family, all these things matter. But what I’m saying is that taxes matter a lot. And what we’re starting to get is humongous divergences in tax rates between what you might call the blue states and what you might call the red states.
Jeffrey Snyder, Broadcast Retirement Network
And, you know, affordability, clearly an issue. We’ve seen gas prices, food prices. That just compounds, I would think, Jared, with this decision of, hey, where should I live?
Where do I want to live long term?
Jared Dillian, Jared Dillian Money
Yeah. And, you know, what we’re seeing is that just since 2017, since Trump passed the Tax Cuts and Jobs Act, which limited the deductibility of state and local taxes to $10,000 a year, that really is what started off a huge migration within the United States. California has lost 500,000 people a year since that law was passed.
New York and Illinois have lost people. Florida has gained people. Texas has gained people.
All the states throughout the South has gained people. And that’s because when that was passed, if you have high state income taxes, it limited your ability to deduct them at the federal level.
Jeffrey Snyder, Broadcast Retirement Network
Is there a breaking point? Obviously, people are migrating. We have great technology.
A lot of people have the ability now to be flexible with where they work because a lot of people work remotely or can work remotely. But is there a breaking point, a threshold? You don’t have to give me an exact amount, but that people say of any class, middle class, upper class, that just say, hey, I’m not going to do it anymore.
I’m just going to wash my hands, pick up, bring my family, bring my wife, bring my husband, and move to another state.
Jared Dillian, Jared Dillian Money
Yeah, I think that breaking point gets to be when you get to combined state and federal taxes of about 50%. California, the state income, the top state income tax rate is 13.3%. So if you put that on top of a top federal rate of 37%, that gets you to 50.3%, which is a lot. In New York, Mayor Mamdani wants to raise city taxes to 5.88%, which would take New York state and local to 16.8 on top of a 37 federal, which is about 54%. Once you start getting to those levels, then people say, look, I can move to Florida where state and local taxes are effectively zero, and I can save 100,000 or more on my taxes. That’s really meaningful. That makes a big difference.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, especially when you’re saving for retirement, trying to save for a home, whatever, trying to put your kid through college, kids through college, or yourself through college, every little bit counts. And that value of compounding, really, really important. When you’re looking to do the math, so you’re deciding on state A versus state B or C or D, states have all different forms of taxation.
There may be property taxes. There may be income taxes. I’m not asking for all the specifics, but how do you discern and make sure that you’re really getting what you think you’re getting when you make that move?
Jared Dillian, Jared Dillian Money
Yeah. When I make those decisions, I do the math. I’m not sure everybody does the math.
I live in South Carolina. South Carolina is a state that has 5.2% income taxes. It used to be seven.
And the goal is to get it to zero. There have been thresholds put in place in terms of revenue so that the state income tax rate will get to zero over time. When I moved here in 2010, it was 7%.
It was actually pretty high. But South Carolina has pretty close to the lowest property taxes in the country. So what that meant was people were coming to South Carolina, but we were getting a specific type of person.
We were getting retirees because retirees don’t have income. So they don’t care about the income tax, but what they care about are property taxes. And I can tell you that in this area, the property tax bill on a typical $300,000 or $400,000 home will be about $750 a year.
Extremely low. So that affects the states that people move to, and the weather is good.
Jeffrey Snyder, Broadcast Retirement Network
Yeah. I’m just north of you, as you know, in Charlotte. Maybe the weather’s not as good as in South Carolina, but it’s pretty darn good.
We’re attracted to your state. But I would imagine you’re seeing an influx just because of that decrease in income tax. You’re seeing people move from all around the country, even people who maybe wouldn’t have thought of the South maybe as a place that they wanted to live.
Jared Dillian, Jared Dillian Money
Yeah. And ultimately, here’s where I think we’re going with this. If you look out 10 or 20 years and these trends and taxes stay intact, where Southern states are lowering them and the rest of the country is raising them, you’re going to see such big changes in migration that really cities like New York, Chicago, LA are going to become less relevant over time.
Miami is going to become the new financial center of the world. I don’t know if you’ve spent any time in Nashville lately, but Nashville is absolutely booming. There’s no state income tax in Nashville.
Dallas is becoming a financial center. In 10 or 20 years, it’s going to completely reshape what the US looks like.
Jeffrey Snyder, Broadcast Retirement Network
Yeah. I would say that’s a good thing. They say that states are the laboratories of democracy.
There’s a competition that exists, whether it’s California versus Texas. I’m talking about a healthy business competition, not like we want to whatever. But that’s important.
I think if you can see financial businesses move out of New York, move to New Jersey, or move to Texas or Florida, that’s ultimately going to benefit the consumer, which is all of us.
Jared Dillian, Jared Dillian Money
Yeah, it really benefits everybody. I can tell you that the South… I actually wrote a piece for Bloomberg.
I used to be a columnist at Bloomberg Opinion, and this was back in 2017. After the Tax Cuts and Jobs Act passed, I wrote a piece called The South Will Rise Again Under Trump’s Tax Plan. That is exactly what’s happened.
Tennessee has no state income tax, Texas, Florida. I think there’s nine states that don’t have a state income tax, South Dakota, Alaska, Wyoming, New Hampshire. You mentioned property taxes earlier.
Some of the states with no income tax actually do have high property taxes. Texas has high property taxes. Florida has high property taxes.
Now what you’re seeing in Florida, as Governor Ron DeSantis is actually talking about also getting rid of property taxes. The only taxes that they will collect are sales taxes, which is even more incredible.
Jeffrey Snyder, Broadcast Retirement Network
Yeah. Look, ultimately, it’s almost like consumption. You’re totally changing the process by which you’re collecting taxes, leaving a lot of the income untaxed, which is good for everybody.
As we close out our discussion this morning, what are you looking for in the next, I don’t know, 12, 18 to 24 months when it comes to what some of the states are doing, some of these migration trends? Are there anything in particular that you’re going to be tracking and looking for?
Jared Dillian, Jared Dillian Money
Well, what’s interesting about all these tax changes is that not only are Southern states lowering them, but other states are raising them. What you’ve seen in the last couple of months is a proposed tax change in Virginia, where they’re going to add two more rates of 8% and 10%. Massachusetts passed a millionaire’s tax of 5%.
Rhode Island is passing a millionaire’s tax of 3%. And these are surtaxes. Washington just passed a 9.9% millionaire’s tax rate that may or may not be constitutional under the state constitution. But not only are red states lowering them, but blue states are actually raising them further, which to rates that… If you’re talking about a 9%, 10% state income tax rate, that gets you pretty close to that 50% number that I was talking about. There’s a saying on Wall Street, it’s called capital flows where it’s treated best.
And like you said, the states are a laboratory and they’re in competition with each other for people and resources. And we know how this is going to play out.
Jeffrey Snyder, Broadcast Retirement Network
Yeah. It’s going to be interesting to watch. Again, I think you’re right.
We’re going to continue to see this migration. Technology, for the most part, has allowed us to do that. And people are going to go, look, they’re going to vote with their feet.
Jared, we’re going to have to leave it there. Great piece. Great to see you.
Thanks for joining us. And we look forward to having you back again very soon, sir.
Jared Dillian, Jared Dillian Money
Thanks very much.