Officials in Washington state are receiving a same-day delivery of bad news from Amazon founder Jeff Bezos on the problems with narrowly targeting graduated tax policy. Bezos recently announced that he is moving from Washington state (with its new capital gains income tax and highest in the nation estate/death tax) to fully income and estate tax-free Florida. Although Bezos said the desire to be closer to family drove the cross-country move, the tax impacts of the move show you can “Work Hard. Have Fun. Make History” while also lowering your tax burden.
The Tax Foundation notes:
"Jeff Bezos announced a move to Miami, and somewhere, a Washington state revenue official was probably moved to tears.
Bezos sold about $15.7 billion worth of Amazon stock between 2020 and 2021, according to news reports. If we assume that Bezos—who, other than the symbolic purchase of one share last year, has not purchased any shares of Amazon in decades—had held onto these shares since the IPO, he saved nearly $1.1 billion in taxes by selling those shares before the new state capital gains tax went into effect. Whether or not it was a motivating factor, relocating to Florida ensures that future sales won’t be subject to Washington’s new capital gains tax, either.
Meanwhile, Washington officials have spent recent years bandying about wealth tax proposals. Wealth taxes are uniquely economically damaging—but for those targeted by them at the state level, they can also be fairly easy to avoid . . .
Again, even though the official estimate tried to account for some outmigration, presumably including some of the state’s wealthiest taxpayers, this is worth repeating: his decision to move to Florida just eliminated potential wealth tax collections worth nearly half the official estimate. When a tax is so heavily concentrated on a few wealthy, highly mobile individuals, that’s what happens when just one person moves. And if the tax were ever adopted, others might follow.
While Bezos may not be thinking about this yet, by moving to Florida, he also shields his heirs from Washington’s highest-in-the-nation estate tax, with a top rate of 20 percent.”
The hometown Washington Policy Center wrote:
“What does this all mean for Washington State? Taxes have consequences.
For every Jeff Bezos or Fisher Investments that makes headlines for moving, there are many more who quietly leave the state. Washington’s competitive advantage for decades was its lack of an income tax. People and businesses will continue to leave for more tax-friendly states. This shouldn’t be a surprise to anyone.
Washington shouldn’t build its financial future on risky and volatile taxes like the Washington capital gains excise tax. This move highlights an inherent flaw in taxes that target individuals and businesses.”
The lesson for policymakers is that there’s more to tax policy, a truckload more. This includes a potentially big hole in revenue collections by relying on targeted and highly graduated tax sources instead of the tried-and-true policy of low rates and broad bases of a sound tax structure.