Jeff Bezos’ Florida move: A tax lesson for the rich

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Jeff Bezos made a post in 2023 nostalgic instagram video From his pre-super-yacht days to Amazon’s first temporary home office in Seattle in 1994. This was the backdrop to an announcement that he was moving from Amazon’s birth city in Florida to new locations, reportedly to be closer to his parents in Miami.

However, unlike the video, another reason for the transfer was nothing more than sentimentality.

Exactly one year later, Forbes reported The move alone could save Bezos about $1 billion in 2024, due to the Sunshine State’s tax policy, which is far more favorable to the investor class than Washington state, which Bezos left behind.

Low state taxes are good for most people, but great for the rich

Low-tax states attract wealth because low state taxes disproportionately favor the rich — and those with higher incomes might consider following Bezos’ lead. Consider the following points from A kiplinger analysis.

• States with no income taxes often compensate for lost revenue with higher sales taxes and other regressive flat taxes, which disproportionately burden low-income people.
• Municipalities often charge high property taxes, which larger salaries can more easily absorb.
• Some low-tax states, such as Texas and Florida, struggle to fund public schools and transportation, which the wealthy rely on less than ordinary families.
• In other countries, such as Alaska, the cost of living is high, consuming a smaller portion of the budget of wealthy families.
• In others, including Nevada, housing markets can be competitive – and higher earners have an advantage in bidding and borrowing.

When investments are your income, capital gains tax matters most

The wealthy receive the majority of their income from investment returns, which are taxed at the federal level at a far more favorable capital gains rate than ordinary earned income, allowing them to pay a lower tax rate than many average earners.

For people like Bezos – and millions of other high earners forbes Not to mention his net worth of $216.3 billion — reducing or eliminating capital gains taxes at the state level could mean five-, six- or, in Bezos’s case, nearly 10-figure savings.

An easy billion for Bezos

Forbes notes that Bezos stopped selling Amazon stock in January 2022, the same month his then-home state of Washington implemented a 7% tax on long-term capital gains over $250,000.

Moving to Florida, where there is no state capital gains tax, Bezos sold more Amazon shares in a year than ever before and more than any other American billionaire who is required to disclose trades — about $13.6 billion worth.

Although neither Washington nor Florida imposes an income tax, Bezos saved $952 billion (7% of $13.6 billion) in never-paid capital gains taxes by switching from the former to the latter. The lesson is that if investments provide your income, location is everything.