Minnesota Supreme Court rules on "Snowbirds": 26 Factors!

Hey Snowbirds, You’ll Want To Know About This New Residency Ruling

Excerpt:

Minnesota residents who live part-time in another state could still get slapped with a hefty income tax bill.

That’s after a 4-3 court ruling that further defines what’s meant by the residency law.

One Minnesota couple will have to cough up $390,000 in income taxes because their claim of non-residency was rejected.

Indeed, parts of the ruling are a chilling reminder to those shedding taxes for sunshine.

Tax attorney Barry Gersick advises anyone splitting time between states to seek counsel before deciding on residency status.

It’s more complicated than just spending over half a year, or 183 days, in your resident state.

“They really try to determine if somebody really did in fact change domiciles, change the center of their life away from Minnesota to somewhere else, or did they just do it in name only,” Gersick said.

Minnesota Department of Revenue uses 26 different factors for determining residency status. And they’re not all that obvious.

Revenue is looking for your focal point, where your most active bank accounts are located and where your kids go to school. They’ll check where you buy resident sporting licenses and title your vehicles.

They’ll also look at where you own the most property and get most mail.

“It helps to have an attorney or accountant in one of the two states advise you,” Gersick said.

The state can even factor in where you attend church and maintain the most business contacts when deciding on residency.

Comment: Link to the ruling in the article. My brother-in-law has domiciled to Florida while maintaining a home in the Twin Cities

Tax collectors chase rich New Yorkers moving to low-tax states. Auditors inspect cell records, even your dog's vet bills https://t.co/xi4QVGnW3m

— James Peet (@jrpeet) March 8, 2019

Minnesota # 2 Tax-Unfriendly State for Retirees

10 Tax-Unfriendly States for Retirees

Excerpt:

#2 MINNESOTA
State Income Tax: 5.35%-7.85%
State Sales Tax: 6.875% (cities and counties can add another 2.65%)
Estate Tax/Inheritance Tax: No/No

Minnesota offers retirees cold comfort on the tax front. Social Security income is taxed to the same extent it is taxed on your federal return. Pensions are taxable regardless of where your pension was earned. Income-tax rates are high, and sales taxes can reach 9.53% in some cities. Food, clothing, and prescription and nonprescription drugs are exempt from sales taxes. The North Star State does offer some residents 65 and older who have income of $60,000 or less the option of deferring a portion of their property tax. But this is a low-interest loan, not a tax-forgiveness program.

Comment: Tax friendly states

Dayton: Goodbye Grandma and Grandpa

Mark Dayton's Snowbird Tax

Excerpt:

It eliminates the "snowbird" tax loophole that allows people to live outside the state for six months, plus a day, and owe no state income tax. Dayton claims that closing the loophole, which would seem to be a delicate piece of legislation, would raise $500 million, though the Department of Revenue has no data to support that claim.

Comment: A direct quote from Dayton's website (PDF)

1. Add a 4th Income Tax Bracket of 10.95% on taxable income above $130,000/year for individuals and above $150,000/year for married couples, filing jointly. Raises an additional $1.899 billion for the biennium, according to the Department of Revenue.
   
2. Add a third Property Tax bracket of 2% on the value of homes over $1 million. Raises an additional $95.4 million for the biennium, according to the Department of Revenue.
   
3. Eliminate the "Snowbird" tax loophole that allows people to live outside Minnesota for six months and one day of the year, and pay no personal income taxes in this state. Raises estimated revenues of $500 million for the biennium (not available from the Department of Revenue).

Final comment: Some states are tax friendly to retirees ... not Minnesota. And less so under Mark Dayton's plan

Your state’s burden per capita

CNN interactive graphic


Comment: Interesting thing is that States with no income tax have a lower debt burden (like TN or TX). States with no state income tax are in red, states taxing only dividend and interest income are in yellow

Today's Democratic Party default is always higher taxes

The Minnesota Prelude - Land of 10,000 tax increases

Excerpt:

Earlier this week Democrats who control both legislative houses passed a three-year $1 billion income tax increase. This would raise the top tax rate to 9.1% from 7.85%, taking the rate even higher than that in New Jersey and New York (outside of Manhattan).

Yesterday Mr. Pawlenty vetoed this tax foolishness, as he has three previous tax hikes as Governor. The tax increase was targeted at the rich, but it applied to individuals with an income of $113,100 for singles and $200,000 for joint filers. Note how the definition of "rich" keeps becoming more expansive.

An analysis by the state department of revenue found that nearly six in 10 filers hit by the higher rates would be farmers or small business owners—i.e., the people who write paychecks. The higher rates would go away in 2013 if the state has a $500 million surplus, though the spenders would make sure that day never arrived.

This budget brawl was precipitated by a 4-3 Minnesota Supreme Court decision to invalidate $2.7 billion in emergency budget cuts, technically called "un-allotments." Mr. Pawlenty made those line-item cuts earlier this year to close a $3 billion budget deficit. One reason for the budget gap is that Democrats in St. Paul, much like Democrats in Washington, D.C., approved nearly $1 billion in new health-care entitlements. The practical solution here would be for the legislature to approve the Governor's cuts, which won't put the fragile economy at risk.

This Minnesota drama is typical of the fiscal battle taking place in at least a dozen state capitals, and soon to occur in Washington. Today's Democratic Party default is always higher taxes. Dominated by government-employee unions, they refuse to rethink government spending despite the steep recession. Last year six states raised income tax rates, and this year another five are attempting to do so.

That didn't work so well in 2008 or 2009 in Hawaii, Maryland, New Jersey or Wisconsin—states that still have budget holes even after trying to soak the rich. Maryland lost revenue from millionaire tax filers after it raised rates.

Mr. Pawlenty's veto sets the stage for an extended budget showdown that should help him politically. Higher tax rates don't produce prosperity or balanced budgets—as we can see in New Jersey and New York, or Greece and Portugal.

Comment: I really appreciate how Pawlenty has held the line against tax increases!

Minnesota #6 most taxed state

Most Taxed States


Comment: Other highly taxed states: Hawaii (#1), Connecticut (# 2), Vermont (# 3), New York (# 4), Arkansas (# 5), Minnesota (# 6) , New Jersey (# 7), California (# 8), Massachusetts (# 9), Maryland (# 10)

States "in residents' rear view mirrors"

Escape From New York - A new study says taxes are driving people away

Excerpt:

Between 2000 and 2008, the Empire State had a net domestic outflow of more than 1.5 million, the biggest exodus of any state, with most hailing from New York City. The departures also have perilous budget consequences, since they tend to include residents who are better off than those arriving. Statewide, departing families have income levels 13% higher than those moving in, while in New York County (home of Manhattan) the differential was even more severe. Those moving elsewhere had an average income of $93,264, some 28% higher than the $72,726 earned by those coming in.

In 2006 alone, that swap meant the state lost $4.3 billion in taxpayer income. Add that up from 2001 through 2008, and it translates into annual net income losses somewhere near $30 billion. That trend is part of a larger march for New York: In 1950 the state accounted for 19% of all Americans, but by 2000 that number had fallen to 7%. The city's main saving grace has been its welcome mat for foreign immigrants, who have helped to replace some of those who flee.

As the study's authors, E.J. McMahon and Wendell Cox, suggest, no single reason can be fingered for a million migrants seeking their fortunes across state lines, but one place to start is New York's notorious state and local tax burden. According to the Tax Foundation, between 1977 and 2008, New York has ranked first or second in the country for its state-local tax burden compared to the U.S. average.

In the years considered by the Empire Center study, New York's state and local tax burden ranged between 11% and 12% of income. The peak year for taxes, 2004, was followed by the peak year for departures—as New York lost nearly 250,000 people to other states in 2005. And that's before another big tax hike this year.

That pattern is consistent with the annual migration patterns, showing that highly taxed and economically lackluster states were most likely to end up in residents' rear view mirrors. According to the annual study by United Van Lines, states like New York, New Jersey, Michigan and Illinois have been big losers in recent years.

Comment: A EZ way to compare states taxes is Bestplaces.net. We looked at housing in Tennessee while we were away on vacation there. A nice executive style house in a premier neighborhood had property taxes 40% of what we pay in MN .... AND TN has no State income taxes!.

States raise taxes

More States Look to Raise Taxes

Excerpt:

At least 10 states are considering some kind of major increase in sales or income taxes: Arizona, Connecticut, Delaware, Illinois, Massachusetts, Minnesota, New Jersey, Oregon, Washington and Wisconsin. California and New York lawmakers already have agreed on multibillion-dollar tax increases that went into effect earlier this year.

Comment: Our property taxes are up 14% over last year. Which way do you think the value of our home went? (Down!)

Schwarzenegger morphs into "Car-taxula"

The Decline of California - They still think they can tax their way out of this one

Excerpts:

It's sad to watch. The Golden State -- which a decade ago was the booming technology capital of the world -- has been done in by two decades of chronic overspending, overregulating and a hyperprogressive tax code that exaggerates the impact on state revenues of economic boom and bust. Total state expenditures have grown to $145 billion in 2008 from $104 billion in 2003 and California now has the worst credit rating in the nation -- worse even than Louisiana's. It also has the nation's fourth highest unemployment rate of 9.3% (after Michigan, Rhode Island and South Carolina) and the second highest home foreclosure rate (after Nevada).

To close the current deficit, the pols in Sacramento are nearing a deal that cuts spending by $15 billion and raises $14.2 billion in higher taxes on income, sales, gasoline and cars. Six years ago Mr. Schwarzenegger helped depose Governor Gray Davis by calling him "Car-taxula." Now he's agreed to double the same tax.

Mr. Schwarzenegger has won at least some concessions from Democrats, who run the most liberal legislature this side of Trenton. The budget deal contains a handful of useful tax breaks for job creation and the first public union workplace reforms in a decade; it also creates a new rainy day fund. These taxpayer victories wouldn't have been possible if Republicans in the legislature hadn't held out for them.

But the plan is still far short of the radical tax and spending surgery the state needs. It's loaded with short-term gimmicks -- such as $5 billion of borrowing from future lottery receipts and nearly $10 billion in one-time federal stimulus cash. Even proponents concede the plan doesn't balance spending and revenues 18 months from now.

The tax increases will continue to chase even more productive people out of the state. For at least two years, the sales tax would rise by one percentage point to 8.25% and the income tax by 0.3% to a top marginal rate of 10.56%.

Comment: Raising taxes in their current economic climate is like pulling back the yoke in a stall

California: Tax exodus

California's Gold Rush Has Been Reversed

Excerpt:

While it has the sixth highest tax burden in the nation, according to the nonpartisan Tax Foundation, California is facing a breathtaking $40 billion budget deficit this year. This comes on the heels of a decade-long spending spree. Last year the state budget was $131 billion, up from $56 billion in 1998.

Citizens are burdened by all manner of state regulations. To mention just one example, this year a new law enacted by ballot initiative bans cages chicken farmers use on the grounds that it is inhuman to put birds in cages that prevent them from spreading their wings. Complying with the new law will cost farmers hundreds of millions of dollars, which will force many to leave the state. And that will force us to buy our eggs from other states and, possibly, others nations, such as Mexico.

And just as a fallen tree can divert the flow of water in a creek, bad economic policies divert the flow of investment. Entrepreneurs and investors, seeking the path of least resistance, leave when it becomes easier to make a living in more business-friendly states. In 2000, according to the state's Department of Finance, about 150,000 people moved into California. But in the years that followed the in-migration slowed, and in 2005 it reversed, when a net 52,000 people moved out. In 2008, the outflow topped 135,000 people.

Consequently, Idaho, Utah and Wyoming all have unemployment rates around 5% at a time when California is suffering an unemployment rate of 9%. Californians are moving east and creating jobs in their new home states.

Over the past few years, we've witnessed the state government's response to the capital and entrepreneur flight out of our state: Taxes remain high, and lawmakers employ all the tricks in the book to produce "balanced" budgets from shifting expenses around to borrowing ever larger sums of money.

Comment: Not a California story but a Minnesota one: I have a relative who is a "snow bird". That would be 6 months in Minnesota and 6 months in Florida. He is ready to spend 53 weeks in Florida and 51 in Minnesota just to save on taxes.

California's rolling budget fiasco - spending the state to ruin

Arnold's 'Ishtar' - The Governor surrenders on taxes.

Excerpts:

A big part of the problem [in California] is the Terminator himself. When Mr. Schwarzenegger ran for Governor in 2003 amid the last California fiscal crisis, he promised a new ethic of spending restraint, no new taxes and less debt financing. Six years later none of that has happened. Once California crawled out of that last fiscal emergency, Mr. Schwarzenegger made one more stab at budget reform, got clobbered at the ballot box, and has since given in and let the budget grow to $144.5 billion -- a 40% hike over four years.

...

Mr. Schwarzenegger even boasts that his tax plan will "invigorate our economy and generate jobs." Well, perhaps jobs for moving van companies to help people flee to better tax climes. The sales tax could not be more poorly timed: Golden State retailers have already seen a rapid slowdown in sales. The last time the sales tax was raised, in 1991, California's retail sales slumped to their lowest ebb in 30 years.

The only politicians standing against the media-political consensus for higher taxes are Republicans in the Assembly. Under California law, a two-thirds vote by the legislature is needed to pass a tax increase. Assembly leader Mike Villines has it right when he says that "We just believe that higher taxes will lead to more businesses leaving the state and encourage even more spending."

Democrats refuse even to trim the budget. Neither they nor the Governor have proposed shutting down a single government program. Many California voters also seem to live under this delusion that government is free. The state has a debt of $60 billion and the worst credit rating among the 50 states. But in November Californians approved a $10 billion bond for a high-speed rail system that will add $600 million in annual debt servicing costs to the state budget every year until the middle of the century.

...

We'd suggest Mr. Schwarzenegger and the rest of the Sacramento establishment take a field trip to New Hampshire. That state maintains better schools, roads and general public services than California, though the Live Free or Die state has no sales or income tax. Meanwhile, California labors under the second highest income tax rates, and the politicians now want to impose the fourth highest sales tax. And the state still has the largest budget deficit in the nation.

The real crisis isn't a lack of tax dollars. It's a political class that is spending that beautiful state to ruin.

Comment: Michigan's another state that taxed small businesses to emigrate: Michigan: A Taxing Place To Do Business. Note author's comments on Detriot:

Our state’s largest city still has a per capita tax burden far higher than the average for Michigan municipalities. It is burdened by bloated bureaucracy, corruption and cronyism, and old ways of thinking and doing things. Instead of being the engine for Michigan’s growth that it ought to be, it’s too much of a drain on both the economy and state taxes. Indianapolis, a city that works, has one-fourth the bureaucracy per citizen and spends about a third as much. Mackinac Center recommendations for fixing Detroit would go a long way to improving Michigan’s overall tax and business climate.