Tax Law

Arizona Newcomers Expected After Changes in Tax Deductions

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Arizona Newcomers Expected After Changes in Tax Deductions

Welcome Arizona newcomers. The Citadel Law Firm expects to see accelerating migration to Arizona.

Tax Professor Paul Caron, Dean of the Pepperdine University School of Law, summarizes in Rich States, Poor States how recent changes in federal tax law will accelerate the migration from high tax blue states to low tax red states.

Prior to the Tax Cuts and Jobs Act of 2017, residents of high tax blue states could take an unlimited tax deduction on federal tax returns for state and local taxes ("SALT") paid on certain income and property.  The tax deduction allowed residents of blue states to shift roughly 1/3 of their federal tax burden onto red states with comparatively lower SALT rates.

But beginning in 2018, the SALT tax deduction is capped by the new federal law at $10,000 per family.  A consequence of this loss of SALT tax deduction will mean blue state residents will now bear the full cost of their state and local tax policies and receive no additional offset against federal tax liabilities.  For example, the top marginal income tax rate in California exceeds 13%, which prior to 2018 could be deducted from a taxpayer's federal return.  Now, the maximum tax deduction a California taxpayer can take is capped at just $10,000 on his federal return.

Arthur Laffer and Stephen Moore, writing in The Wall Street Journal, recently suggested California and New York alone could lose 800,000 residents as a result of high state taxes.  The good news?  Dr. Laffer and Mr. Moore suggest the winners of this migration will be states like Arizona, Nevada, Utah, Tennessee, and Texas.  Arizona newcomers will bring their wealth with them and invest in businesses, homes, and commercial property.

If you are moving or recently moved your family or business to Arizona, it is likely you will need professional tax and estate planning advice for yourself, your family, or your business.  If you already own a home, business, or commercial property in Arizona, you may need to consider more sophisticated estate, business, and retirement planning strategies to secure expected gains in the value of your estate and preserve your legacy for your spouse and children.

The attorneys at the Citadel ® Law Firm in Chandler, Arizona, serve the east valley of Phoenix in Estate Planning, Wills and Trusts, Business and Contracts, and Tax Lawyer.

You can learn more about this subject in Rich States, Poor States (11th ed. 2018) by Arthur B. Laffer, Stephen Moore, & Jonathan William.  For a synopsis of this report, see "So Long, California. Sayonara, New York."  published in The Wall Street Journal on April 24, 2018.

Please visit our website to learn more about the Citadel Law Firm ® and its estate planning and tax lawyer, David Gerszewski.

If you need legal assistance, please schedule a free consultation today.  Our attorneys practice Estate Planning law and look forward to working with you.

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