With New York facing a serious $2.3 billion budget deficit, the state’s Department of Taxation and Finance is getting increasingly fierce in chasing funds from wealthy residents fleeing its high taxes.
Gov. Andrew Cuomo blamed the exodus of the rich due to the change in federal tax laws limiting state and local deductions for New York’s revenue shortfall, according to CNBC.
Now the lack of funds is leading to more intrusive tactics to keep some of that cash, including checking on records of cellphone calls, social media usage and visits to the veterinarian or dentist.
‘If you’re a high earner in New York and you move to Florida, your chances of a residency audit are 100 percent,’ according to Barry Horowitz, a partner at the WithumSmith+Brown accounting firm. ‘New York has always been aggressive. But it’s getting worse.’
Gov. Cuomo blames the tax burden increase after federal regulations limited state and local deductions for chasing more rich New Yorkers out of state leading to the $2.3 billion budget deficit
Wealthy residents of high tax states such as New York have long fled for states like Florida where there is no state income tax
More than half of those audited between 2015 and 2017 lost their cases for an average of $144,270 per audit paid, Monaeo a software company that sells a residency track app said.
With the tax collectors using more high-tech tools to crosscheck information, a move to a state with no income tax like Florida is a red flag as New York particularly wants to crack down on ‘fake moves.’
‘Even if a small number of taxpayers leave, it has a dramatic effect on this tax space,’ Gov. Cuomo noted about the loss of the wealthy residents that pay nearly half of the state’s revenues.
With the stakes so high, the subjective ‘domicile test’ seeks to prove a person’s residency based on multiple personal factors because of how complex a tremendously wealthy person’s living situation might be.
The New York State Department of Taxation and Finance has become increasingly more intrusive and creative in auditing the wealthy who claim they changed their state residency
The state is also proposing a ‘pied-à-terre tax’ on non-resident owners of luxury apartments in New York
An auditor looks to see if the home in another state is larger, more expensive than a second New York home, and if important personal items have also migrated.
The location of dentist and veterinarian visits are also potential signs of fraud to the tax collector as Horowitz points out that people do not usually go out of state to visit the dentist or keep their pets away from home.
With auditors apt to make in-person visits, even perishable food can be a target of investigation.
‘I had one audit where the agent opened the refrigerator and the stuff had been sitting there for a year and a half,’ Horowitz told CNBC. ‘We won the case.’
Even Blanca Ocasio-Cortez, the mother of Democratic Socialist Rep. Alexandria Ocasio-Cortez, noted the heavy tax burden in New York for her move to Florida.
Blanca Ocasio-Cortez said she picked Eustis because a relative already lived here, and right before Christmas 2016, she paid $87,000 for an 860-square-foot home on a quiet street that dead-ends into a cemetery
‘I was paying $10,000 a year in real estate taxes up north. I’m paying $600 a year in Florida,’ she said. ‘It’s stress-free down here.’
The hole in the budget also has New York looking to wring cash out of non-resident owners of luxury apartments, according to Bloomberg. The proposed ‘pied-à-terre tax’ could raise as much as $9 billion in additional revenue.
New York is the worst state to be rich, according to a report this month, with a 12.48 percent cumulative tax on that population. The Empire state has the highest income tax collections per capita, at $2,345.