Bezos moves to Florida

The Amazon founder Jeff Bezos has announced his decision to move to Florida. His home state for the last 30 years has been Washington. He says he wants to be closer to his parents and his Blue Origin rocket company - but maybe tax considerations could also be a factor.

Washington has introduced a new capital gains tax, which charges 7% on all gains above $250,000. If he had sold his Amazon stock today not in 2020/21 he would have had to pay a further $1.1 billion in taxes.

Washington also has the highest estate taxes in the US, with a top rate of 20% on estates worth more than $9million. Florida does not charge estate taxes on death.

Bezos is worth an estimated $160 billion so that would mean his heirs would save $30 billion in taxes.

It is well understood that if taxes are considered to be too high it changes the behaviour of those who can move - like Bezos.

This phenomena is often referred to as the Laffer curve, a bell curve which plots revenue raised against tax rates charged. The curve starts at zero rate of tax, when the revenue raised is zero to 100% when again the revenue raised will be zero because no-one wants to work for nothing.

The Laffer curve originated when Ford administration officials Dick Cheney and Donald Rumsfeld met in 1974 with Arthur Laffer to discuss raising tax rates. Laffer alledgedly took a napkin and drew the bell shaped curve. His argument was that raising taxes affects behaviour, but there is an optimum point to which rates can be raised and people will not change their behaviour to avoid them.

This point is the optimum rate of taxation above which rate the revenue raised will begin to fall.

Of course the Laffer curve is an over simplication. Both Washington and Florida are US states in which US citizens live, why does it make sense for Washington to raise taxes by increasing the rate of capital gains tax and charging estates on death if people like Bezos will move and it wll get nothing out of him - the short answer is that it perceives its attractiveness will puersuade people like Bezos to stay.

This is the same argument being used by the Labour party in its decision to abolish the reliefs of the non-doms if it comes to power. The UK and London are sufficiently attractive to foreigners it argues that forg=eigners will come to live in the UK anyway. But whereas estate tax is at a maximum of 20% in Washington it is 40% in the UK - maybe this is a bit much for foreign visitors to want to pay?

Maybe they will visit but not live and will spend their fortunes elsewhere?