Q. What do you think about wealthy people who move their legal residency to Florida to avoid the income and estate taxes levied by the northern states where they have lived their whole lives? I have several friends who are doing this, but as far as I can tell, they still have deep ties to their old home states. Seems like they’re gaming the system.
A. To me, citizens have not just a legal obligation but an ethical imperative to support the local and state governments where they actually live and where they enjoy the civic benefits those governments provide. On the other hand, people have every right to pursue their financial self-interest by moving to a lower-tax state—especially one with a climate as nice as Florida’s most of the year—as long as it’s an authentic change of residency and not just a tax dodge.
I take issue, ethically, with folks who try to have it both ways: meticulously dividing their time almost equally between residences in Florida and their original home state, maintaining old relationships (social, civic, cultural) in the latter, and paying very little tax to either state—in most cases, just the property tax on a home in each jurisdiction. To justify the benefits of paying much less total tax, there should be some personal sacrifice involved: severing old ties and putting down deep and expensive roots in the new community.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
It’s not enough to simply meet the minimal legal test for not filing a tax return in your former home state: not spending more than 182 nights a year there. You should also shift your voting, civic commitments, financial assets and charitable giving to your new state. If you maintain a residence in your former state, it should feel like a second home, not a principal residence filled with your favorite clothing, art and personal papers. If you try to play it both ways, expect your old state to try to keep taxing you.
Have a money-and-ethics question you’d like answered in this column? Write to editor in chief Knight Kiplinger at ethics@kiplinger.com.
-
Being an Executor is a Thankless Job: Do It Well AnywayYou can be a "good" executor of an estate, even though carrying out someone's final wishes can be challenging.
-
Question: Are You Planning for a 20- or 30-Year Retirement?You probably should be planning for a much longer retirement than you are. To avoid running out of retirement savings, you really need to make a plan.
-
How to Steer Clear of the Medicare Tax TorpedoBetter beware, because if you go even $1 over an important income threshold, your Medicare premiums could rise exponentially due to IRMAA surcharges.
-
How Should I Handle a Tax Windfall That I Don't Want?taxes If getting a huge windfall from impending tax cuts has you feeling guilty, here are some options.
-
Mergers Designed to Avoid U.S. Taxes: Is This Ethical?Business Costs & Regulation Firms should stay and fight for comprehensive tax simplification that would lower the top C-corp rate.
-
Government Reparations for Oppressive Acts
Business Costs & Regulation It is ethically dubious for descendants of oppressed peoples to seek reparations for wrongs done to their forebears, to be paid by contemporaries not responsible for long-ago sins.
-
Should Nonprofits Pay Property Taxes?
Tax Breaks Because most basic services provided by cities are funded by real estate taxes, it's reasonable that every property owner should pay something.
