Among the wealthy tri-state-area set, there’s more buzz than ever about fleeing south to Florida, land of mild winters and, more importantly after last year’s federal tax overhaul, zero state personal income tax.
Actual action? Pretty scarce.
High-earners are learning what tax experts have known for years: Tax collectors in states like New York make it really hard to leave. Wealth managers and tax lawyers say many of their clients are staying put after hearing about the scrupulous records they would have to keep to show they’ve really uprooted their lives and severed ties with their former states — and that it’s not as easy as just spending a few more days a month in a Florida vacation home.
Like other high-tax states, New York’s Department of Taxation and Finance will go to great lengths to keep wealthy residents on their tax lists. The states’ methods can be aggressive: Issuing subpoenas to pore through credit card statements, bank transactions or phone records to track a taxpayer’s location, and sending auditors to interview doormen or confirm doctors’ appointments.
“When people understand they have to change their life circumstances, some people say: ‘Never mind, that’s too big a life change for us to do right now”’ said Timothy Noonan, a partner at law firm Hodgson Russ LLP, who’s based in Buffalo and Manhattan.
Lloyd Abramowitz, a wealth manager who works with clients who live in New York City and Greenwich, Connecticut, says fewer than 10 percent of clients who express an interest in moving are actually going through with it. He said he typically counsels people making around $500,000 in taxable income a year not to uproot themselves just for tax reasons. Even above that level, family considerations and ties to community have to be taken into account, he said.
It isn’t easy to measure, but one early indicator shows no evidence of a mass exodus. In the past 12 months through May, the number of net change-of-address forms filed with the U.S. Postal Service for people moving to Florida from New York, New Jersey and Connecticut has actually declined slightly from recent highs.
Of course that data doesn’t account for movement among certain groups, like the ultra-rich, for whom the tax savings may just be too great to ignore. In recent years, hedge fund titans including David Tepper, Paul Tudor Jones and Eddie Lampert have moved to Florida. This year, some money managers are planning to relocate as Miami and Palm Beach officials ramp up their advertising efforts following the new $10,000 limit on state and local tax deductions.
Overall, more than 10 percent of New Jersey residents will see a tax hike this year — in California, it’s 8.6 percent, while 8.3 percent of New Yorkers will see higher levies, according to a study from the Tax Policy Center.
Four northeastern states most affected — New York, New Jersey, Connecticut and Maryland — sued the Trump administration last week to invalidate the cap, saying it unfairly targets them. Years of litigation are likely to ensue, but some legal experts have said the states’ arguments are dubious.
‘Teddy Bear Test’
There are two main hurdles for New York residents looking to flee. The first is the domicile test, which requires proof that a resident moved to a new home with no intention of coming back. Submitting a change-of-address form alone isn’t enough, nor is obtaining a new driver’s license or registering to vote in a new district, though checking those boxes is still important.
Instead, New York tax collectors look at five factors: homes that are owned, how time is spent, where favorite possessions are kept -– the so-called “teddy bear test” — and business activities and family ties. Potential relocators are finding they can’t just buy a one-bedroom condo in South Beach, but leave behind a 20-room palace in Westchester County, or kids in a Manhattan private school.
Former New Yorkers must meet another test as well, called the 183-day rule, if they move but then hold onto a home in New York state. They must prove that they haven’t spent more than 183 days per year in the state. The rules are strict: Any days without proof can be counted as a day in New York, and even a second inside the state’s borders can count as a whole day.
Auditors generally pre-screen transcripts of tax returns to unearth those that could have issues or require additional verification. They used to spend a couple weeks every year in a warehouse near Albany combing through pallets of tax returns for irregularities, but computer programs have made it easier for New York state to identify taxpayers who might be flouting residency laws, said Brian Gordon, former district audit manager in Manhattan and Brooklyn, who worked for the state for more than 30 years.
Taxpayers who move away just before a big spike in income, say from a severance package or the sale of a business, are likely to be targeted for an audit, Gordon said.
Those who have recently moved and make more than $500,000 are among those also likely to be scrutinized, said Annie Zhao, who spent seven years as a New York state tax auditor and now works at accounting firm Anchin. Taxpayers who seem to be on the cusp of spending 183 days in their new homes could also be caught in auditors’ crosshairs.
The tax issues created by a move can linger for years. Taxes are generally subject to a three-year statute of limitations from when a return is filed, but taxpayers who start spending more time in New York even years after they’ve made a move — like around the birth of a grandchild — may come to auditors’ attention and be forced to provide evidence of a move that happened a decade or more in the past.
“Residency audits are different from any other kind of audit,” said Christopher Manes, a tax attorney at Sanger & Manes who specializes in California residency cases. “It’s a lifestyle audit. It’s very unpleasant. It’s very expensive.”
Still, some taxpayers may still decide to head south after they file their tax returns in April and see how they really fare under the new tax law.
Advisers add that there’s nothing wrong with moving for tax reasons – even if it means New York, New Jersey or California lose out just before a big windfall. It’s just essential that their clients have taken all the proper steps beforehand.
“You can do it right,” said Verenda Smith, deputy director of the Federation of Tax Administrators. “You’ve just got to move. You’ve got to really leave the state with no intention of coming back.”
SELF-DRIVING CAR DEVELOPERS SHOULD PUT PEDESTRIANS FIRST
Since march, when an autonomous vehicle killed a pedestrian in Arizona, forecasts for AVs have been decidedly less optimistic. But autonomous vehicle promoters are undeterred. AI entrepreneur Andrew Ng contends that self-driving cars will be safe for pedestrians when walkers and cyclists conform to their limitations. “What we tell people is, ‘Please be lawful and please be considerate,’” he told Bloomberg.
Has Mr Ng ever walked for as much as an hour in a city? If so, he should realize that consideration of pedestrians’ needs—and motorists’ compliance with the few laws that protect pedestrians—are so deficient that any pedestrian who values their time (as drivers do) must improvise. And in fact, such improvisation can even make pedestrians’ journeys safer.
To be fair, Mr. Ng’s mistake is a common one. From a driver’s point of view, pedestrians’ behavior may appear erratic, lawless, and even suicidal. The solution, then, is to train pedestrians to do better, or to restrict them. In actuality, most pedestrians are much smarter than the dumb systems that are intended to control them—far smarter than signals, and even smarter than self-driving cars. A pedestrian who is on the right side of the street and wants to turn left at the next intersection may cross early, at mid-block. What may appear to some as selfish and dangerous rule-breaking may actually be safer and less disruptive to vehicular traffic. In one study of pedestrians aged 65 or older, for example, researchers found that the risk of a pedestrian-motor vehicle collision was 2.1-fold greater at sites with marked crosswalks, particularly those with no traffic signal or stop sign.
In the 1970s, research teams led by William H. Whyte filmed pedestrians on busy sidewalks as they walked around New York City. Walkers filtered past each other with extraordinary efficiency, coming within inches of each other but almost never touching. Such performance requires human intelligence. No one would propose putting pedestrians on autonomous Segways as a way to keep them from colliding with each other. Either traffic would slow almost to a stop, or collisions would increase.
Autonomous vehicles are frequently touted as safer and more efficient alternatives to conventional cars. But if safety and efficiency are indeed primary values, then cities should not deter walking by making it harder, but invite more walking by making it easier. This would entail, among many other things, urging drivers to be more lawful and considerate about pedestrians.
Indeed, the success of self-driving cars depends upon a rise in walking as a practical means of getting around. AVs cannot deliver on their own promises of safety and efficiency if they deter walking. Safety matters because we care about human health. Sedentary living is already inducing health conditions such as heart disease, obesity, and diabetes; public health can only worsen if an autonomous future compels people to ride in cars for every mobility need. And self-driving cars will not be more efficient if we negate their per-mile efficiency benefits by increasing the total miles each person spends in the car.
Smart traffic signals can increase streets’ vehicle capacity by shepherding cars safely through intersections without compelling them to stop. But we don’t yet know how they’d work for cyclists and pedestrians, those who make the most efficient use of street space, use the least energy, and cause the least danger to others. Either they will have to be equipped with devices that incorporate them into signal systems, or smart signal systems will have to get much better at detecting and tracking them. The social and technical complications of either alternative are substantial.
In the meantime, we have access to innumerable low-tech possibilities. Traffic calming—design features that slow vehicles down—can make select streets much safer for everyone. Planners in the Netherlands, for example, apply humans’ smartness, instead of trying to suppress it, by designating certain streets “bicycle streets”; though drivers can still use them as “guests,” they must defer to cyclists. By conventional U.S. standards, this method is considered dangerous because it depends too much on human judgment. But the traffic safety record in the Netherlands should compel us to reconsider. In 2013, there were 3.4 road traffic deaths per 100,000 people in the Netherlands; the figure for the U.S. was 10.6. Extravagant promises about the driverless future too often distract us from implementing effective, inexpensive, low-tech improvements today.
To succeed on their own terms, AV developers will have to do much better by pedestrians. Bloomberg reports that AV developers are looking into “distinctive sounds—much like the beeping noise large vehicles make when reversing—to help ensure safe interactions between humans and autonomous vehicles.” This technique, in the form of the klaxon or car horn, is well over a century old. Honking was then attacked as a public health menace. Today, such noises can only make the walking environment less inviting, relative to the quiet, climate-controlled interior of a vehicle. For pedestrians who can’t afford this alternative, walking will be less pleasant than ever.
Too often we hear extravagant promises for self-driving cars, or warnings that “the AV future is coming; we have to get ready.” But the saw does not use the carpenter; the carpenter uses the saw. AVs are a tool. We humans have to decide if and how we want to use them. Despite the public relations, AVs will not, on their own, deliver safety or efficiency. We have to put them to work for the purposes of our choosing.
Chinese electric vehicle maker Nio closes 10 per cent up in New York IPO debut
In one of the year’s largest Chinese public offerings in the US, Nio, an electric-vehicle maker backed by the Chinese technology giant Tencent, debuted on the New York Stock Exchange Wednesday and closed up nearly 10 per cent.
Nio stock opened below range at US$6 a share, and had a mixed reception on a day when the Dow Jones Industrial Average was flat. After dropping to a low of US$5.35, however, shares recovered to close up at US$6.58.
Nio raised US$1 billion and has a goal to turn profitable within three to four years.
Founded by Chinese entrepreneur William Li in 2014 and based in Shanghai, Nio is regarded as China’s answer to Tesla, with its ES8 pure-electric, seven-seat sport-utility vehicle being compared to Tesla’s Model X.
Like Tesla, Nio continues to report a loss, posting a net loss of US$502.6 million in the first six months of 2018 on revenue of US$6.95 million, according to the company. Nio which is still at the outset of production, has sold 2,100 vehicles so far.
“We are aiming to turn a profit within three to four years by focusing on the Chinese market before going global,” Nio Chief Financial Officer Louis Hsieh told the South China Morning Post on Wednesday. “China accounts for about 60 per cent of the electric vehicle market in the world.”
The IPO comes as China continues to push into the electric-vehicle market. About 375,000 vehicles were manufactured by China in 2016, counting for about 43 per cent of total production globally, according to McKinsey & Company.
Nio, formerly known as NextEV, is backed by Tencent Holdings, along with other high-profile corporate investors including the tech giant Baidu, private equity firm Hillhouse Capital and Temasek, a holding company owned by the government of Singapore.
All the early investors have kept their stakes in the company at the time of the IPO, said Hsieh, indicating their faith in Nio’s prospects.
In the immediate future, however, uncertainty is building as trade disputes between the US and China continue to escalate.
“Tariffs currently help us for now because they make US cars more expensive,” Hsieh said. “But this is something we are monitoring closely as situations evolve.”
While acknowledging the comparison between Nio and Tesla, he said that Nio regards other high-end brands such as Mercedes and Audi as competitors as well.
“We are catering to the premium car buyers in China who want bigger cars like SUVs and that is how we design the cars,” said Hsieh said.
USS New York sailors pause to honor 9/11 victims, first responders
The sailors of Mayport-based Naval ship USS New York remember the Sept. 11 terrorist attacks every day.
Seven and a half tons of steel remains from the World Trade Center towers literally helped build their ship, reminding those on board daily of the sacrifices of the first responders.
The hat of a fallen police officer and the helmet of a fallen firefighter are displayed inside the ship, and a surviving fireman’s jacket hangs in the ship’s bridge, always standing guard as the crew’s “12th man.”
On the 17th anniversary of the worst act of terrorism on U.S. soil, hundreds of sailors gathered Tuesday for a brief but emotional ceremony at Naval Station Mayport.
Capt. Brent Devore spoke about the 9/11 memorial items throughout the ship, which is one of only three Navy ships with items from the World Trade Center.
“We constantly say that every day is 9/11 and that we have to constantly remind ourselves we’re surrounded by the heroes,” Devore said. “We know that Trade Center steel is baked into the ship. We have memoirs throughout the entire ship that remind us of the first responders and all of the families who gave the sacrifice.”
News clips showing the planes hitting the Twin Towers had sailors holding back tears during the remembrance ceremony as they listened to the screams and cries of people on the ground that day.
As the video played, smoke was released from one of several areas of the ship that includes steel from the World Trade Center, serving as a reminder of what New York City residents and first responders saw for weeks, even months after the attacks — a plume of smoke that made losing thousands even more difficult.
Shivanane Harry, a sailor from New York City, said the attacks affected his career path.
“It will be in the history books. It’s one of those things that’s going to be there — remember the people that passed,” Harry said. “I’m here, and that’s one of the reasons why I joined the military.”
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