Gov. Andrew Cuomo of New York. (Photo: AP)
A new limit on state and local tax deductions isn't forcing taxpayers to leave New York, New Jersey and California despite claims from some Democratic politicians that the federal tax overhaul is causing a mass exodus of wealthy residents, according to Moody's Investor Service.
"Migration from high-tax states is lower than a decade ago and generally following the U.S. as a whole, while many people are moving from one high-tax state to another," according to the research led by Moody's vice president and senior credit officer Marcia Van Wagner. "Jobs and demographic trends will continue to influence relocation patterns more than tax burdens."
Migration rates in the five high-tax states most affected by SALT — California, Connecticut, Maryland, New Jersey and New York — are generally in line with U.S. trends, according to the report released Monday. The data also suggests that people who leave high tax states aren't necessarily doing so for tax reasons. The most popular destination for people leaving New Jersey and Connecticut is New York, according to Moody's.
The 2017 Republican tax law capped at $10,000 the amount of state and local tax, or SALT, people can deduct from their federal liabilities. The deduction, which was previously unlimited for some taxpayers, have prompted Democrats to say President Donald Trump targeted mostly Democratic states to pay for his $1.5 trillion tax cut bill. A group of congressional Democrats is working on legislation to make the deduction more generous, though it's unlikely to become law anytime soon.
