Article by: Anthony De Yurre
Over the last decade, there has been a gradual increase in the number of residents and businesses emigrating to tax-advantaged states such as Florida, Arizona, Texas, and Nevada, from tax-burdened markets including New York, Connecticut, Illinois, Massachusetts, and California. The Covid-19 health crisis has accelerated the trend, as businesses embrace remote work and individuals opt to live in places with a lower cost of living.
According to a recent report, approximately 1,000 people are moving to Florida every day—lured by the promise of cost savings, plentiful business and career opportunities, and an enhanced quality of life. Many of these migrants are coming from the New York metropolitan area. U.S. Postal Service records indicate that more New Yorkers have relocated to Florida than any other state, with more than 13,000 requests for address changes to South Florida filed in the past eight months. Executives and employees in the finance, real estate, and technology sectors are among the most likely to relocate, since they tend to be high-wage earners who are upwardly mobile.
Recently, Tesla CEO Elon Musk relocated to Texas, which is one of seven states without a state-issued income or estate tax. Blackstone made national news when it announced plans to open a new Miami office focused on technology with at least 215 employees, choosing Florida over expanding its New York presence. Goldman Sachs is also reported to be plotting a move to South Florida, potentially following in the footsteps of other high-profile financial firms including Icahn Enterprises, Universa Investments, Starwood Capital, and Appaloosa Management.
With the incoming presidential administration pledging to raise taxes on the wealthy and financially strapped states pondering additional taxation, domestic migration patterns are showing no signs of slowing down and the wealth migration trend should be even more pronounced in 2021.
While the promise of lower taxes and improved quality of life are enticing, there are several variables that individuals and businesses must consider when contemplating a relocation or expansion. The following is an overview of the factors that should be weighed prior to making a move.
Affordability: While much of the relocation talk revolves around tax benefits, any relocation or expansion must be undertaken within the context of a full cost-benefit analysis. One of the main drivers of business migration to South Florida is because of state and local tax advantages AND the availability of relatively affordable commercial space—a double win that often creates net savings.
Local Talent Pool: The cities of tax-advantaged states have dramatically ramped up the availability of quality talent across different sectors, but you still have to do your homework to see if it’s the right talent for your business. Most companies simply do not have the resources to relocate most of their employees, which is why it is important to know that local hires will pass muster. Also, many local authorities are choosing to develop their metropolitan areas in ways that accommodate specific industries. With the right workers and local governments rolling out the red carpet, you’ll hit the relocation sweet spot.
Connectivity: While all major metropolitan areas in tax-advantaged states have international airports, they don’t have the same connections. This will be important for companies that have international operations. A manufacturer, retailer, or service provider with a large book of business in Latin America and the Caribbean, for example, will make much better use of Miami International Airport than a company focused on business expansion in East Asia. Unique to South Florida, the expansion of the commuter Brightline high-speed passenger rail connecting Miami-Dade, Broward and Palm Beach Counties has become a game changer that has exponentially increased the size of the employee talent pool. Assessing logistics at all levels—local, national and international- will be key.