Monday, March 30, 2015

The migration begins

With snow lingering in our yards, it’s hard to believe the baseball season begins this weekend. As the team returns to Boston next week, they are among the first “locals” to return from the winter spent down south. Other migrating types include Ruby Throated Hummingbirds and American Gold Finches — lovely little birds that spend their winters in warmer climates to avoid our chilly temperatures. The larger Snowbird used to be easily spotted driving its giant yellow Cadillac with Florida plates and a bar across the backseat for hanging clothes migrating north on route 95 every May. With cheaper flights and Rhode Island-plated cars this species has been less easy to spot in recent years but Governor Raimondo’s budget might make them squawk and flush themselves out.

One of the many bad raps on Rhode Island’s tax policy is that we’ve incentivized wealthy Rhode Islanders to move to Florida. They might keep a beautiful house here, buy a condo there and spend six months plus a day in the sweltering Florida sun so they can avoid paying income tax to Rhode Island while enjoying six months less a day here. Florida very cleverly took advantage of our bad policy and gives legal Florida residents a sizeable homestead exemption to encourage more people to make the residency change. In this competition, Governor Raimondo just made a clever move, proposing a tax on second homes valued at over a million dollars. Some have called it a “Taylor Swift” tax but I think about it more as a Yellow Cadillac fee.

While I think Rhode Islanders are taxed enough — and certainly don’t love the idea of the state being able to levy a tax on property — this Yellow Cadillac fee seems fair to me. After all, it’s aimed at non-Rhode Islanders who’ve got a second home here valued at more than million dollars. They might be tucked away in a condo in Naples until that 181st day passes and they can liberate themselves to rush north and watch a sunset on Narragansett Bay. They might be from New York and spend their weeks toiling on Wall Street and their summer weekends on Watch Hill. Regardless, they use our roads, enjoy our beaches and pay their income tax (if any) somewhere else. We’re happy to see them when they arrive and are glad they love Rhode Island so much. Despite what opponents say, don’t think this fee will drive them away since for most it will amount to less than renting a cottage on the Vineyard for a week.

The bottom line is this: we’ve complained for decades that wealthy Rhode Islanders are motivated to move to Florida. While this policy change won’t stop most of that migration since it only impacts those with a million dollar vacation home, the Yellow Cadillac fee ensures that it’s no longer a free ride for the wealthiest of them. Someday perhaps our tax policies will allow us to compete with states like Florida and New Hampshire for the tax-savviest residents, but for now at least the Yellow Cadillac fee will add another figure into their calculations.

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