A story in the Kansas City Star reveals that millions of Americans are moving to states without income taxes. Not surprisingly, politicians and revenue bureaucrats from high‐tax states are monitoring escaping taxpayers in hopes of retaining the ability to seize a portion of their income:
No‐income‐tax states such as Florida, Nevada and Texas are looking increasingly attractive to people getting ready for retirement. …But before you move to a tax haven, it’s important to pay attention to the fine print of how to move. It’s easy to make seemingly minor mistakes that can trigger a painful audit — and a hefty bill — from the high‐tax jurisdiction you thought you had left behind. …Some relatively high‐tax states are increasingly cracking down on individuals who claim to have moved out of state, but still maintain strong connections to their former homes. Massachusetts plans to hire additional tax examiners in the next few months, some of whom will be assigned to a special “domicile unit” as part of its tax‐audit program. … state income tax rates can run as high as 10.3 percent in California and 8.97 percent in New Jersey. Besides Florida, Nevada and Texas, other states with no state income tax for individuals include Washington, Alaska, South Dakota and Wyoming. New Hampshire and Tennessee don’t have a broad wage‐based income tax but do tax interest and dividends. …from April 2000 through June 2006, there was a net migration of 2.3 million people moving from states with income taxes to states with no income taxes, an average of more than 1,000 people moving per day, says Richard Vedder, an economics professor at Ohio University in Athens, Ohio, based on an analysis of census data.