Adios, Wall Street. Fund Managers Might Be Headed For South Florida
South Florida has long been a magnet for the wealthy, but the federal tax bill passed late last year might be an added encouragement to people who control vast wealth — New York-based fund managers, especially — to relocate to Florida.
Two recent relocations to Florida among the New York monied set are the founders of I Squared Capital, Sadek Wahba and Adil Rahmathulla, Bloomberg reports, citing anonymous sources. I Squared Capital is an infrastructure investment manager focusing on energy, utilities, telecom and transport in the Americas, Europe and Asia, with about $12B in assets.
The firm currently has offices in New York, Houston, London, New Delhi, Hong Kong and Singapore, and is planning to open a new location in Miami.
Florida has long been a low-tax state, but now that the federal tax code limits state and local tax deductions at $10K, including property taxes, wealthy individuals presumably have even more reason to consider leaving high-tax states such as New York.
Organizations such as the Miami Downtown Development Authority are quick to point out the tax saving possibilities in Florida, which also has no personal income tax. Earlier this year, Bloomberg reports, members of the Miami DDA went to Manhattan and Stamford, Connecticut, to sell their city to financial professionals.
Gov. Rick Scott (a former Greenwich resident) has also made trips to the Northeast to talk up his state among investment firms.
According to the Tax Foundation’s 2018 State Business Tax Climate Index, Florida has the fourth-best tax climate in the U.S. to do business, based not only on rates, but on the structure of the tax systems in each state. New York, on the other hand, comes in at No. 49, with only New Jersey ranked worse by the foundation's calculations. Connecticut is No. 44.
Even before the federal tax change, a number of major fund managers had relocated to South Florida, or at least opened additional offices there. The question now is how many will follow the trend.
Not everyone believes there will be a tsunami of fund managers or ultra-wealthy individuals migrating into South Florida.
Immediately after the tax bill passed in December, Meredith Tucker, a CPA with Kaufman Rossin in Fort Lauderdale who handles tax issues for entrepreneurs and high net worth individuals, told Bisnow that talk of an exodus to Florida is overblown.
For many wealthy people, Tucker said, the state and local income deduction change isn't a big thing. High earners still have to pay the alternative minimum tax in Florida.
Gerson Preston accountant Alan Lips said in the same Bisnow article that the current tax change isn't going to drive families to Florida unless they were already considering a move for other reasons, especially for the lifestyle.