Congress is ready to pass President Trump’s tax plan, but hedge fund managers in New York are increasingly considering relocating. Robert Willens has been in finance for over 40 years, advising hedge fund clients about their tax affairs. He claims that, if this bill is passed, the wealthiest citizens of New York will want to relocate to a state with more favorable tax legislation. Congresswoman Nita Lowey, whose district includes all of Rockland County, echoed these sentiments. At a press conference, she highlighted how the curtailment of the SALT provision will devastate New York’s middle class.
What is SALT?
State and Local Taxes (SALT) is a provision which allows individuals to receive a tax deduction after paying their income and property taxes. It affects about one third of taxpayers, but the proportion of claimants increases with income. The wealthiest New York citizens are currently able to claim tax deductions of up to $100,000.
How Will the GOP Budget Affect SALT?
Congress is going over a bill which aims to eliminate SALT deductions for income taxes completely. This in effect will mean that those who usually claim SALT deductions will see their income taxes increase significantly.
The SALT provision can also be used for deductions on property tax. However, the 2018 budget places a cap on property tax deductions at just $10,000. For wealthy New Yorkers with large estates, property taxes are bound to increase substantially. The size of the tax increase will be directly proportional to a state’s property tax, which for New York has one of the highest.
Who is Affected?
Only 10% of those on a salary of $50,000 claimed SALT deductions, while this number rises to 81% of taxpayers on a salary of $100,000. Although highest earners will be hit the hardest, middle class property owners will also see an increase in taxes.
Credit Repair Companies (https://creditrepaircompanies.com/) highlight the importance of companies with bad credit paying off their debts fast, but this can be difficult for businesses paying a high tax rate. As a result, the only way for businesses to expand may be to relocate. States outside of New York tend to offer lower property taxes, to make up for the diminished reductions created by the GOP’s tax plan.
Trump’s tax plan was supposed to reinvigorate business by providing cuts to corporate taxes. However, by all but eliminating the SALT provision, businesses in New York will find themselves paying more in income and property tax. This has led many companies to threaten to relocate, but whether this will happen is yet to be seen.