Jeff Bezos, the founder of Amazon and the world’s second-richest person, recently made a move from Seattle to Miami, and it seems that one of the major benefits of this relocation is the significant tax savings he will enjoy. By leaving Washington, which recently introduced a 7% tax on capital gains, Bezos could potentially save a whopping $288 million in taxes after selling $4 billion worth of Amazon stock in the past week.
While Bezos stated that his move to Florida was primarily motivated by a desire to be closer to his parents and the operations of his space-exploration company Blue Origin in Cape Canaveral, the financial advantages of relocating to a state that does not tax capital gains are hard to ignore. This move aligns with a growing trend among the ultra-rich, who are finding it increasingly appealing to shift their residences and businesses to low-tax states like Florida.
Bezos wasted no time in making his presence known in his new neighborhood. He recently purchased two homes in Indian Creek, a luxurious man-made barrier island known as the “Billionaire Bunker,” for a staggering $147 million. It is expected that he will demolish these properties and replace them with custom-built homes. While Bezos enjoys the benefits of his new location, Washington is left potentially missing out on tax revenue that could have been allocated to education and school construction, as these were the designated recipients of the state’s capital gains tax.
The difficulty for states in retaining their wealthiest taxpayers is evident in Bezos’s move. In a post-pandemic world where people and businesses have more flexibility to relocate, it has become increasingly challenging for states to pin down their most valuable taxpayers. Miami, in particular, has become a magnet for the ultra-rich due to its low taxes and high quality of life. Notable finance moguls like Ken Griffin and Josh Harris have also made the move to this region in recent years. Similarly, Texas has experienced an influx of wealthy individuals from higher-tax states such as California and New York.
The introduction of Washington’s capital gains tax was an attempt to capture some of the wealth concentrated in the state, which is home to corporate giants like Microsoft, Starbucks, and Amazon. However, this tax may have unintended consequences, as it could discourage individuals from moving to or remaining in the state. Aaron Johnson, tax counsel with Lane Powell, a law firm that challenged the capital gains tax in court, stated that the tax could “disincentivize people to come here or incentivize them to leave.” Wealthy individuals like Bezos have the means and ability to seek out tax efficiencies and make strategic decisions regarding their residences.
The capital gains tax in Washington, which went into effect on January 1, 2022, applies to gains over $250,000 per year, excluding certain types of sales. The Washington Supreme Court upheld the tax as a permissible excise tax in April, despite arguments from business groups claiming it is an illegal income tax. However, the tax now faces a ballot measure seeking to repeal it, likely to be presented to Washington voters in November. This initiative is one of six conservative ballot measures supported by Brian Heywood, a money manager who moved to Washington from California over a decade ago to escape high taxes and regulation.
Heywood and other anti-tax advocates are concerned that the capital gains tax is just the beginning and that Democrats in Washington will use it as a stepping stone to implement a state income tax. They argue that these efforts will either drive the state’s wealthiest residents away or make Washington a less attractive place to start and grow businesses like Amazon.
In conclusion, Jeff Bezos’s recent move from Seattle to Miami not only brings him closer to his family and Blue Origin’s operations but also provides him with significant tax savings. By leaving behind Washington’s capital gains tax, Bezos could potentially save $288 million in taxes after selling a substantial amount of Amazon stock. This move reflects a broader trend among the ultra-rich, who are finding low-tax states like Florida increasingly appealing. However, Washington may face the consequences of losing its wealthiest residents and the tax revenue they generate. The future of the capital gains tax in Washington will be determined by a ballot measure seeking to repeal it, which will be presented to voters in November.