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Florida's Sunshine and Tax Benefits Beckon Billionaires

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11/11/2019 | 07:15am EST

By Juliet Chung and Joseph De Avila

President Trump's recently announced adoption of Florida as his home state over his native New York follows a rich tradition of high-profile financiers who have ditched northeastern states for warmer climes with lower taxes.

David Tepper, Paul Tudor Jones and Barry Sternlicht are among the prominent transplants who have pulled up roots in New York, New Jersey or Connecticut in recent years for Florida. New Yorker Carl Icahn has said he is moving his company to Miami next year.

"One day, I was at my home in Florida and thought, 'Why the hell am I staying in New York?'" Mr. Icahn, 83 years old, said in a telephone interview.

Mr. Icahn, whose philanthropic stamp on New York includes Icahn Stadium on Randall's Island and the Icahn School of Medicine at Mount Sinai, said he has lived in New York nearly his entire life and loved it. "But in the last few years, I believe that it is certainly no longer the city of my youth," he said.

The loss of the super-wealthy isn't just a matter of reputation. The exodus of billionaires can crimp state budgets.

In 2017, Connecticut's top 100 filers, out of a base of 1.8 million, paid $1.13 billion in income taxes, the equivalent of 12% of the state's income-tax revenue for fiscal year 2018.

New Jersey and Connecticut tax officials said it is too early for state revenue data to show whether the 2017 tax law Mr. Trump signed imposing a $10,000 cap on state and local tax deductions has caused high earners to flee. The most recent tax data available is for 2017, and the SALT cap went into effect in 2018.

The SALT cap has widened the gap between Florida and other states with no income tax, such as Wyoming, and New York City, where residents can owe income taxes at rates that approach 13%. Previously, individuals would pay a top rate of 39.6% in federal income taxes, plus state and local income taxes, but those taxes were typically deductible for the highest earners. Now, the state and local rates come atop the highest federal rate of 37%.

Connecticut, with a struggling economy, and New York have been shedding residents. Connecticut's population of 3.57 million in 2018 represents a decline of 22,000 since its last peak in 2013, according to Census figures. New York's population dipped to 19.54 million in 2018, marking a drop of about 119,000 from its last peak in 2015. New Jersey's population has been rising.

Those who have made the move to Florida in recent years cite reasons including anticipation of the 2017 tax law change; the high costs in New York compared with the greater purchasing power of a dollar in their adopted home; and warmer weather in Florida, where many of the transplants already owned vacation homes.

"I moved to Florida because of my age and my arthritis," said billionaire investor Leon Cooperman, of his decision years ago to relocate from New Jersey to Boca Raton, Fla.

Mr. Cooperman, 76 years old, said he saves more than two hours of commuting time daily because he works out of his home office in Florida, instead of commuting from New Jersey to Manhattan.

The billionaire hedge-fund manager Mr. Tepper moved to Florida in 2016 and relocated his firm's headquarters there, sparking concern among New Jersey lawmakers about the impact on state revenue.

Most of his investment staff continues to work in Short Hills, N.J. They remain visually connected to the owner of the Carolina Panthers pro football team through an iPad system, said people familiar with the arrangement.

Others who have switched their domiciles to Florida include Mr. Sternlicht, whose Starwood Capital Group changed its headquarters from Greenwich, Conn., to Miami in 2016, and John Phelan, the cofounder of Michael Dell's family office MSD Capital, which opened an office in West Palm Beach in 2016.

At least one financier has decided that New York is still worth embracing. John Paulson, who made billions betting against the U.S. housing market before the financial crisis, said last year he was thinking of moving to Puerto Rico after his children, both teenagers, finish high school. His spokeswoman said last week he was no longer considering moving out of New York.

--Richard Rubin contributed to this article.

Write to Juliet Chung at juliet.chung@wsj.com and Joseph De Avila at joseph.deavila@wsj.com

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