One of the themes we cover on this blog is the importance of place in a world where people are becoming increasingly untethered. While I'm a firm believer that great local places have enduring value, this does not mean that technology isn't driving greater fluidity in the way people live, work, play, and optimize their taxes.
Over the last decade, the population of ultra-wealthy Americans (those with a net worth greater than or equal to $30 million) has risen noticeably in two states: Texas and Florida. California, a high-tax state, still dominates; however, Texas has overtaken New York, and Florida has overtaken Illinois. Notably, both Texas and Florida have no state income tax — they also have warmer weather than New York and Illinois.
As we have talked about before, there's a longstanding migration trend in the US toward sun, urban sprawl, and lower taxes. But it's not always as clear-cut as a rich person fully relocating to a lower-tax jurisdiction and completely severing ties. The enduring value of place means that many people still travel back and forth to meet whatever personal or professional obligations they might have.
And today, there are apps, such as TaxBird, that will meticulously track the number of days you spend (or your phone spends) in each jurisdiction to ensure you don't cross any important residency thresholds.
The global standard is the 183-day rule (or roughly half a year). In many or most cases, if you are physically present in a place for more than 50% of the year, you are automatically considered a resident for tax purposes. But it's not always this simple, so check with your tax advisor. Regardless, the untethering of life and work is surely allowing more people to tax-optimize in this way.
None of this is surprising.
As Charlie Munger used to say, "Show me the incentive, and I'll show you the outcome." But now we need to think about the longer-term ramifications for colder, higher-tax jurisdictions as capital and tax revenue continue to be siphoned off, not only to Texas and Florida, but to Dubai, Singapore, Hong Kong, Switzerland, Monaco and other places.
Cover photo by Colin Lloyd on Unsplash
This may sound crazy, but I’ve never been to Chicago. It’s on my list, but I just haven’t gotten around to it and I’ve never had a specific reason to go. Hopefully I can make it this summer.
Lately though, I’ve found myself reading more and more about the city. Given that it’s also a Great Lakes city and it’s of comparable size, Chicago is an interesting case study for Toronto. But one thing that seems to keep coming up, is the need for zoning reform.
About a month ago I wrote a post called “The tale of 2 Chicagos”, which was inspired by the blogging of Aaron Renn (The Urbanophile) and Daniel Hertz (City Notes). The discussion was around the prevalence of single-family zoning in most parts of Chicago and how it’s creating a supply constrained market (driving up prices).
But there’s another outcome. Here’s what Daniel Hertz recently argued:
When places in and around downtown become more desirable, developers build more housing, and more people get to live there. But when non-downtown neighborhoods become more desirable, developers can’t build more housing: it’s against the law. So instead, they profit by tearing down old two-flats and building mansions in their place. And as a result, fewer people get to live in those neighborhoods, even as more and more people want to.
Effectively, his argument is that gentrification leads to a loss of housing units. Developers can’t build more housing, so they replace housing. And it all stems from a restrictive zoning code that aims to maintain the character and scale of established neighborhoods. I get that, but you could easily argue that it exacerbates the negatives of gentrification.
It strikes me that Toronto and Chicago are in somewhat similar places in terms of their growth. Without any real natural barriers, both cities had the luxury of being able to develop through horizontal sprawl when they were younger.
But with people now returning to city centers, we’re faced with a series of difficult decisions: How do we balance preservation and growth? How do we balance low-density with high-density? How do we maintain the character of what people love while still creating an inclusive city?
It absolutely can be done, but it’s going to mean embracing a certain amount of change. And that’s not always an easy sell.
One of the themes we cover on this blog is the importance of place in a world where people are becoming increasingly untethered. While I'm a firm believer that great local places have enduring value, this does not mean that technology isn't driving greater fluidity in the way people live, work, play, and optimize their taxes.
Over the last decade, the population of ultra-wealthy Americans (those with a net worth greater than or equal to $30 million) has risen noticeably in two states: Texas and Florida. California, a high-tax state, still dominates; however, Texas has overtaken New York, and Florida has overtaken Illinois. Notably, both Texas and Florida have no state income tax — they also have warmer weather than New York and Illinois.
As we have talked about before, there's a longstanding migration trend in the US toward sun, urban sprawl, and lower taxes. But it's not always as clear-cut as a rich person fully relocating to a lower-tax jurisdiction and completely severing ties. The enduring value of place means that many people still travel back and forth to meet whatever personal or professional obligations they might have.
And today, there are apps, such as TaxBird, that will meticulously track the number of days you spend (or your phone spends) in each jurisdiction to ensure you don't cross any important residency thresholds.
The global standard is the 183-day rule (or roughly half a year). In many or most cases, if you are physically present in a place for more than 50% of the year, you are automatically considered a resident for tax purposes. But it's not always this simple, so check with your tax advisor. Regardless, the untethering of life and work is surely allowing more people to tax-optimize in this way.
None of this is surprising.
As Charlie Munger used to say, "Show me the incentive, and I'll show you the outcome." But now we need to think about the longer-term ramifications for colder, higher-tax jurisdictions as capital and tax revenue continue to be siphoned off, not only to Texas and Florida, but to Dubai, Singapore, Hong Kong, Switzerland, Monaco and other places.
Cover photo by Colin Lloyd on Unsplash
This may sound crazy, but I’ve never been to Chicago. It’s on my list, but I just haven’t gotten around to it and I’ve never had a specific reason to go. Hopefully I can make it this summer.
Lately though, I’ve found myself reading more and more about the city. Given that it’s also a Great Lakes city and it’s of comparable size, Chicago is an interesting case study for Toronto. But one thing that seems to keep coming up, is the need for zoning reform.
About a month ago I wrote a post called “The tale of 2 Chicagos”, which was inspired by the blogging of Aaron Renn (The Urbanophile) and Daniel Hertz (City Notes). The discussion was around the prevalence of single-family zoning in most parts of Chicago and how it’s creating a supply constrained market (driving up prices).
But there’s another outcome. Here’s what Daniel Hertz recently argued:
When places in and around downtown become more desirable, developers build more housing, and more people get to live there. But when non-downtown neighborhoods become more desirable, developers can’t build more housing: it’s against the law. So instead, they profit by tearing down old two-flats and building mansions in their place. And as a result, fewer people get to live in those neighborhoods, even as more and more people want to.
Effectively, his argument is that gentrification leads to a loss of housing units. Developers can’t build more housing, so they replace housing. And it all stems from a restrictive zoning code that aims to maintain the character and scale of established neighborhoods. I get that, but you could easily argue that it exacerbates the negatives of gentrification.
It strikes me that Toronto and Chicago are in somewhat similar places in terms of their growth. Without any real natural barriers, both cities had the luxury of being able to develop through horizontal sprawl when they were younger.
But with people now returning to city centers, we’re faced with a series of difficult decisions: How do we balance preservation and growth? How do we balance low-density with high-density? How do we maintain the character of what people love while still creating an inclusive city?
It absolutely can be done, but it’s going to mean embracing a certain amount of change. And that’s not always an easy sell.
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