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Cities and states have in combined tax revenues during the economic downturn, caused by the coronavirus pandemic. A change that the Trump administration a few years ago, has also diminished some local coffers, because it has caused a slice of super-wealthy residents in high-tax states such as California and New York to move to places with lower taxes, like Florida and Texas.
With rising, the exodus of even a fraction of the 1% (and their taxes) can impact everyone who is left behind - especially the most vulnerable, according to . A professor at the University of Toronto’s School of Cities and co-founder of , Florida explains the long-lasting consequences of wealth flight.
- The 2017 tax overhaul put a cap of $10,000 per year on deductions of state and local taxes that are allowed from federal income tax. Before it was capped, the SALT tax deduction had incentivized high earners to live in cities with high taxes. Although considered the tax write-off a “handout to the rich,” limiting it has blown a hole in the budgets of expensive coastal cities, Florida says. Meanwhile, places with low taxes like Miami and parts of Texas are flourishing.
- can make or break cities. And our entire system of taxation - which is based on people living close to where they work - has been upended during the pandemic. As remote work has gained steam, and some of the wealthiest people have relocated from high-tax blue states to lower-tax red states ( ), Richard Florida expects there will be a lot of on the incoming Biden administration to make fundamental policy changes.
- It’s not all doom and gloom, when it comes to . Florida believes that remote work is a game changer, but it also presents an opportunity to transform central business districts by turning office tower blocks into mixed-use live/work settings with affordable housing options, and thereby create “much more dynamic neighborhoods,” he says.
- In , Florida spells out why it “doesn’t take very many ultra-wealthy Americans changing their address to wreak havoc on cities’ finances.”
- For a deeper understanding of the reasons behind the inequality in many U.S. cities, check out Florida’s book, “ ” which also offers some solutions.
- This and details the cost of COVID-19 to state and local tax collections.