Let’s suppose you are a high-powered executive at a financial company in New York.
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You're doing well financially. You're king, or queen, of the hill. But, your limo sits in traffic. You've paid a million dollars for an apartment the size of a closet and you're paying about 50 cents of every dollar you earn in taxes. But wait, it’s about to get worse: the new tax law means you'll pay even more. You still want to be king, or queen, of this hill?
Well some on Wall Street are done. Finished. They're out of here. AllianceBernstein has been a power in the financial industry in New York for more than a half century. They're leaving for Tennessee. The headquarters, the CEO and most of the New York staff are relocating to Nashville.
This is the start of the exodus we've been talking about. The new tax law clobbers any high-income earners who live in high-tax states: California, New Jersey and New York. And New York City? Forget about it – there's an extra tax to be paid here: the city tax. We've already reported the sharp slowdown in “one percenters” moving in, and now we have AllianceBernstein moving out.
Let’s look at where they're going: Tennessee. In and around Nashville, $1 million buys you a mansion. Your limo won't spend much time in traffic. You won't be paying any state income tax and your property tax will be way below what you've been paying in New York. Plus, and here's the biggest incentive: in low-tax Tennessee, the new tax law will work to your advantage. In New York, it’s a killer.
We think of the new tax law as stimulating the economy, creating jobs, raising wages – and it does all of that. But it’s increasingly obvious that the new law actually punishes those states, all run by Democrats for decades, where local taxes are the highest in the land. Times up. Blue state to red state. High tax to low tax. The exodus has started.