Broward County’s marketing slogan to recruit new companies is “Life. Less Taxing.”
That could become even more apropos, if President Donald Trump manages to sell his tax cut proposal to Congress.
As a state with no individual income tax, Florida could become increasingly attractive to high-income taxpayers in New York, New Jersey, Connecticut, California and Illinois. While the highest federal tax bracket of 39.6 percent would be lowered to 35 percent, federal tax deductions for state and local levies would disappear under Trump’s tax plan.
While Trump’s proposal faces a mighty battle in Congress, that element of the plan would be a boon for Florida, accelerating corporate relocations and moves by high-net worth individuals to states like Florida and Texas that have no individual income tax, some tax and economic development experts say.
“Our state structure has always been the best incentive we have,” said Bob Swindell, president of the Greater Fort Lauderdale Alliance, the economic development organization for Broward. The Alliance is setting aside funds for an enhanced advertising campaign should the Trump plan survive Congress.
Florida is already a place where high-net worth individuals including retirees and professional athletes relocate to reduce their tax bites. The Sunshine State was one of 10 states with the biggest jumps in the top 1 percent of wealthy individuals between 2009 and 2013, according to a 2016 report by the Economic Policy Institute, a non-partisan think tank.
Broward will set its sights on potential company relocations from California, Illinois, New York, New Jersey and Connecticut — all states with high tax rates. “Those would be the key states I would have on my immediate radar,” Swindell said.
In Palm Beach County, the Business Development Board has launched a $100,000 advertising campaign targeting high net-worth individuals through Northeast society magazines including “Quest” in New York and “Greenwich” in Connecticut.
The ads, entitled “Let’s Talk Business,” seek to woo companies from different industries by positioning Palm Beach County as “one of the best business structures under the sun … with an unparalleled lifestyle.”
Business Development Board president Kelly Smallridge thinks CEOs and other executives in New York, New Jersey and Connecticut who are paying high state taxes already are primed to consider Florida, where many own second homes.
Trump’s tax plan “is another reason why Florida is going to become even more attractive,” she said.
Top executives and professional workers such as engineers whose income currently puts them in the highest tax brackets would see their federal tax bite swell with the elimination of the deductions for state and local income taxes.
“Florida is a wonderful place to live where that burden doesn’t exist,” said Steve Klein, managing partner for Gerson Preston, a CPA firm in Miami and Boca Raton.. “It would be a tremendous motivation for income tax payers to relocate.”
Klein said state and local deductions make up 8 to 10 percent of adjusted gross income for six-figure income taxpayers. Top company talent might desire to move to a state with no income tax, if the deductions are lost, which could motivate headquarters to move or open offices in Florida.
That would go a long way in helping Florida attract the high-income jobs, such as technology, that the state wants, Klein said.
But Jeff Rubinger, partner with Bilzin Sumberg law firm in Miami, said there are enough tax cuts and changes under the plan for New Yorkers to stay in New York, if they prefer.
If individuals pass through their pay to a partnership, S Corporation, or limited liability corporation, their tax would be even lower, he said.
“If you get a salary from job, you could set up an S-Corp and have your employment contract through that entity. Then you would be taxed at 15 percent,” said Rubinger, who leads the firm’s international tax practice. “Everybody is going to work for LLCs and partnerships,” he said.
Rubinger said many of his clients would benefit, “and I personally would,” as partner in a law firm. “It’s a huge savings.”
Some say Trump’s tax reform proposal would turn the U.S. into a tax haven. For South Florida — already favored as a place to do international business, that could bring back some businesses from offshore.
“They are proposing to change from a worldwide tax system — where U.S. individuals and companies pay tax on worldwide income, regardless of its source — to a territorial tax system, where foreign source income would be exempt from tax, Rubinger said.
As a result, “you wouldn’t see any more inversions. There’s no need to move headquarters, Rubinger said.
Smallridge said Trump’s frequent visits to his Palm Beach home, Mar-a-Lago, has put Palm Beach County even more on the world map.
The Business Development Board already is working with a couple of international companies that are considering locations in Palm Beach County. They’re unsure what’s going to happen to trade agreements under Trump, Smallridge said.
As a result, “they believe a U.S. operation is critical,” she said.
