America’s Three Richest People Are Now Positioned To Pay Zero State Income Tax
Musk’s move was anticipated, following reported rumors from his friends and associates that the Lone Star State would become his next home. This summer, he relocated his private foundation to the city of Austin. Musk, who is worth just shy of $140 billion, previously clashed with California officials over the state’s coronavirus restrictions, going so far as to sue Alameda County in May and threaten to move his company out of the state after its factory wasn’t allowed to reopen.
Bezos (worth an estimated $183.3 billion) and Gates (worth an estimated $118.7 billion) both reside in Washington State, the birthplace of their companies. Washington and Texas are two of nine U.S. states that don’t collect income tax. The rest are: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee and Wyoming. The Tax Foundation, a leading nonprofit, notes that Tennessee and New Hampshire still tax interest and dividends, but the latter is scheduled to phase out this tax in 2025.
Musk is far from the only billionaire to decamp for income tax havens, however. Donald Trump switched his official residence to Florida in October 2019, after decades of living in his namesake Manhattan tower. Wall Street titans Carl Icahn and Paul Singer moved their hedge funds to the Sunshine State in 2019 and 2020, respectively. Using public records, Forbes confirmed Icahn resides on the private Indian Creek Island near Miami—where Jared Kushner and Ivanka Trump reportedly recently bought a $30 million plot of land—therefore making him exempt from state income tax. Tom Golisano, the billionaire founder of Paychex
These moves can dent state coffers, given the immense income some billionaires generate. When hedge fund manager David Tepper moved from New Jersey to Florida in 2016, the decision looks to have cost the Garden State hundreds of millions of dollars in revenue and upended its income tax forecasts, raising concerns for state officials. American hedge fund billionaire John Arnold pointed out another concern in a Wednesday morning tweet, noting that California’s 13.3% capital gains tax, the country’s highest, effectively falls to zero the moment high earners like Musk simply decide to leave the state for lower-tax locales.
“It’s quite possible [California] is on the wrong side of the Laffer Curve,” Arnold wrote on Twitter, referencing the economic theory that supposes tax revenues will fall if governments set rates too high and can increase if rates are lowered. Arnold lives in Texas, where he pays—you guessed it—no state income tax.