Turn out the lights
The party’s over
They say that
All good things must end
Call it a night
The party’s over
And tomorrow starts
The same old thing again
—Willie Nelson from “The Party’s Over”
No doubt, this was the tune bouncing around in Phil Michelson’s head when he recently announced that we was considering leaving California. The reason: between California and Federal Taxes, he claims that he will be paying a tax rate of 63%. Well, not quite. It’s probably closer to 53%. Still, that comes out to more than $24 million of the $48 million he reportedly made in 2012. Michelson subsequently apologized for making his comments “public” as opposed to keeping it to himself. See “Evans: Phil Mickelson steps back on tax talk“.
Note, he did not apologize for wanting to hold on to more of his stash. So, if he wants to reduce his tax bill by 13.3%, what can he do? Move.
Turns out that there is a reason why pro golfers like to live in Florida. Not only does it have a ton of golf courses, it also has no state income tax. Shazam! Sounds like Ol’ Lefty will be loading up the moving van and heading east in no time.
However, he better be careful and make sure that he does it right, or the California Franchise Tax Board will send him a bill in 2014. This is what he must do:
- File a formal declaration of domicile in the Florida county in which he lives.
- Change his personal mailing address to Florida.
- Register to vote in Florida.
- Obtain a Florida driver’s license.
- Make sure the address listed on his federal income tax return is his Florida address.
- Make sure all statements (banking, investment, credit card, etc.) be sent to Florida.
- Just in case the Franchise Tax Board asks, he better be able to show proof of payment for utilities at his Florida home; and
- Last but not least, he must actually live there more than half of the year (probably the most important part of the plan if you ask me).
And that’s it. I have a feeling that we will be seeing more of this to come as people will literally vote with their feet and flee to low income tax or no income tax states.
Bob Lamm is licensed to practice law in California and Florida. If you have questions regarding California or Florida estate planning or tax issues, please contact Bob for more information.