Breaking up with high tax states is easy to do

By Jason Mercier
Feb 14, 2019

While some state officials continue to flirt with ending Washington’s “competitive advantage” of not having an income tax, Amazon’s Valentine’s Day rejection of New York is a reminder of how easy it is to break up with high tax states.
In news sure to leave broken hearts for other high tax states, Amazon announced today it was canceling its HQ2 in New York. Instead extra investments will be made in the Virginia and Tennessee locations. As reported by the Wall Street Journal:
“Amazon said it won’t reopen its headquarters search. It will continue to add jobs at its other headquarters location in Northern Virginia, as well as offices in Nashville and other tech hubs around the country, the company said.
Amazon has faced criticism from some local officials, who questioned granting the company $3 billion in state and city tax incentives.”
Though ideally a state should compete for jobs with an overall competitive tax base, New York’s high taxes forced it to woo Amazon with the much-criticized incentive package.
Perhaps this stunning breakup will continue New York’s recent epiphany that those with options won’t tolerate high taxes. As noted by the WSJ:
“New York Gov. Andrew Cuomo was on the road to Albany when a light flashed before him. Lo, said a voice from the light, progressive taxes are driving out high earners and damaging the state budget.
Some miracle like that must have happened because on Monday Mr. Cuomo awakened from his first eight years as Governor and according to the Buffalo News declared, ‘Tax the rich, tax the rich, tax the rich. We did that. God forbid the rich leave.’
Mr. Cuomo delivered this testimony from the Book of Tax Revelation while announcing Monday that New York state’s income tax revenue over the last two months was $2.3 billion below projections. ‘That’s as serious as a heart attack,’ he said.”
Route Fifty also highlighted the impact of the federal tax reform law that removed the protection high tax states had been relying on to shield their taxpayers from the sting of state tax policies:
“The governor has suggested that the SALT deduction cap encourages high-income New Yorkers to move to other states and that even if a small number of them leave, it would harm state revenues.
New York saw a decline of $2.3 billion in estimated payments of personal income tax receipts in December and January, which Cuomo has attributed to the curtailment of the full SALT deduction.”
Turns out taxes do matter when deciding where to live and work. Let’s hope Washington officials take this to heart and remember that breaking up over taxes is easy to do.