Confirming what many have suggested, the billionaire founder of the world’s largest hedge fund, warns in his latest letter to watch out for the effects of tax reform on migration, the fiscal conditions of affected states and cities, and an increased polarity in America.
While we have talked a lot about the effects of growing wealth and opportunity disparities in America, we haven’t talked enough about the tax migration that is taking place because of growing differences in state and local tax rates. This tax migration issue is especially important to focus on now because of the expected elimination (under the new tax legislation) of the deductibility of state and local taxes (SALT) against federal income taxes.
The dynamic that I’m referring to is the inevitable and self-reinforcing process in which those high SALT locations that a) have big disparities in income and fiscal shortfalls and b) can neither cut their financial supports to the ‘have-nots’ (because their conditions are already unacceptably low) nor raise taxes on the ‘haves’ (because they will move due to tax rates) suffer from tax migration.
Of course, those low SALT locations with the opposite circumstances benefit from this migration.
This post was published at Zero Hedge on Dec 5, 2017.