CPAs Gerber & Co. ask: Who's Leaving California?
Why retirees are the most likely residents to flee high state taxes...
LOS ANGELES, April 24, 2013 /PRNewswire/ -- State Proposition 30 just might be the tipping point that convinces Californians – particularly aging baby boomers – to forsake their state of residence for an environment with lower taxes and a lower cost of living. This state proposition, passed last year, initiates an unprecedented retroactive tax on high-earning filers. For many, the current tax filing deadline was the tripwire to begin a reevaluation of their living strategy.
Some – but not all – types of taxpayers are now making plans to leave the state. Appearing on Southern California Public Radio's newsmaker show "Take-Two", Los Angeles CPA Selwyn Gerber brought the "flee the state" phenomenon into sharper focus. As founder of the Los Angeles-based financial advisory firm Gerber & Co., he observes that clients generally have one of two responses to today's increased state tax burden. Some consider the new taxes 'tough but necessary' and 'the price we pay for living here'. Others calculate the increased cost of living and taxes, combined with the litigious environment and say 'enough is enough'.
This second group is increasingly made up of those at the tail end of their working life. For these Californians, the high-income opportunities in the state mean less and less. But, by paring down the expense side of their ledger, these same retirees or near-retirees can significantly and immediately improve their lifestyle. Gerber notes that, for many, "an out-of-California replacement residence can cost just one third of what they can get for their existing home. Furthermore, the cost of healthcare is far lower."
The bottom line on leaving the state? "I'm only mildly exaggerating," he concludes, "to say that, for some, it's a move 'from cat food to caviar'."
For those who are considering leaving the state, Mr. Gerber offers a piece of strong CPA advice: If you do move and claim that you are no longer a California resident, make sure that your new lifestyle reinforces this new reality. California officials are known to review cell phone and credit card bills to find out exactly where their "former" residents are spending their time.
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SOURCE Gerber & Co.
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