They Got Rich Off Uber and Lyft. Then They Moved to Low-Tax States

For anyone thinking of moving out of California before/during a major tax event, I _highly_ advise finding and planning with a really good CPA and a tax lawyer that they recommend.

I've not personally done it, but I've had my fair share of small talk with CPAs who regal you with "funny" stories about people who attempt to move out of California to avoid the high tax rate when, e.g., they sell their business or some other major tax event.

The California FTB is extremely aggressive in these cases. They will both investigate and sue you. It doesn't take much imagination to know what being sued by a state government is going to be like. (The California FTB is a double edged sword; I've had pleasant and helpful experiences any time I've called them up and asked tax questions; but their attentiveness goes both ways it seems)

So you better have an immaculate plan in place to prove that you have indeed moved out of the state. One person went as far as making sure to keep every Starbucks receipt from their daily coffee trips after moving to Seattle. (And yes, they had to use that evidence)

This only applies to high net worth individuals, and I'm sure the stories can be exaggerated. But a couple hundred bucks of a CPA and lawyer time is worth every penny of the horror you might save in fighting with the FTB.

Also, I didn't see it called out in the article, but the biggest downside of California's tax code isn't so much the high tax rate as it is the treatment of capital gains. California doesn't give special treatment to long term capital gains like the IRS does. So the difference is exaggerated in that case; you're paying a marginal of 20% to the IRS and a marginal of 13% to California. That's rough. I do generally agree with California's way of doing it, but with the way things are today I can see why many HNWI at least fantasize about moving out of California.

Finally, there are some other tricks to avoid California's tax that have varying rates of effectiveness depending on your situation and desires. I find CRTs to be quite interesting if you find yourself in a situation where you have a high tax FU money event and want to both avoid taxes and do good for the world.

>San Francisco, which has gotten increasingly expensive, crowded and filled with carbon-copy tech bros who drone on about their start-ups. They talked about how they were resetting their lives, how stressed they had been in tech and how they were getting over burnout. They talked about the tech parties they had attended and complained that the celebrations revolved around work.

Ironic the bubbles we create end up making the city you live in "carbon copied". Take public transit, volunteer, meet some locals, there are plenty of people who live in SF that don't work in tech.

There's no evidence that rich are leaving CA in droves. If you like to show off your fancy stuff, there's more people to show it to in CA than TX. Mansions are for ego, not for practical use. If anything, the middle-class is shrinking because housing costs are so high. The homeless come for the weather, so CA is becoming rich or poor, and less middle.

This is just a anecdote; here is some data:

https://lao.ca.gov/laoecontax/article/detail/265

"Although California has had net out-migration among most demographic groups, it has gained among those with higher incomes ($110,000 per year or more) and higher levels of education (graduate degrees)."

Unless they made 7 million or more (after taxes), they will need a job again. The life expectancy of a 35 year old is 50 more years. That is effectively forever when managing money. Single digit millions will not sustain an upper middle class life style forever, even in Texas. When they need a job again, they are better to look where their network and friends are. So stay close to them.

employee 50 at lyft made ~1M over 4 years from their stock gains, i'm assuming that they have not sold much of that stock. fb and google tripled their stock price between 2013 and 2017, and fb quadrupled the stock price from 2013 to now. at that rate, to make a 1M stock package over 4 years only required a stock grant worth between 250k-350k over 4 years, which is rich but does not seem out of the reach of engineers with a few years experience.

is the risk premium really worth it?

The headline and most of the article is misleading, implying that you can leave the state to avoid paying taxes on deferred income like RSUs. You can't.

A small blurb of truth from TFA: "California imposes an income tax on shares vested in the state, but does not tax stock that is sold after someone moves away."

This means that the company you work for is going to sell and send the proceeds from basically 40% of your RSUs to the Fed + California governments to pay owed tax, even if you don't life in California at the time the company goes public or has another liquidity event. Anything you hold longer that is subject to capital gains wherever you live.

https://www.ftb.ca.gov/forms/misc/1100.shtml

> the semiretired tech millennial who left California after getting rich

Anecdotal story, without any actual numbers. So some left and some did not. Maybe most of them stay ?

California has always been a playground for the young. I moved here about a decade ago, when I was 19, from a small town in Illinois. It was for no particular reason other than it sounded like fun; and it was incredible. The first time I saw any ocean irl was the evening I arrived. I remember how powerful it seemed in the twilight; like I shouldn't get too close, or it'd swallow me up. I immediately set-out along the boardwalk hitting every retailer, cafe, surf shop, bar, and headshop along the way. Within an hour I had landed the dream job... Sketchers. mutha. flippin. shoes y'all! I was a bohemian in paradise, and lived happily ever after.

Fast forward 10 years. I'm totally over the beach. Haven't been to a bar/club in over 6 months. Weeks away from defending my phd at ucsd in computational neuro. anyone here hiring? My only two major preferences: (1) no shoe stores, and (2) not california

One thing to note, the article makes it seem like everybody will make retire early level millions. The reality is, only the first hundred or so will make serious money and this for a mega-unicorn that happens once or twice a generation. Normal exists only make huge money for the investors, the founders and maybe a handful of key employees, not all of which were early (e.g. external CEO hires).

So they worked hard where the work was, then took their money and moved where it'll last longest.

Sounds smart to me. Nothing shady about it, just playing your cards right. (As a bonus, they leave a high-paying spot and a place to live for someone else to advance into back in California.)

Kudos to the winners in this game.

Well, why not?! If it weren't for the ability to move, California, New York, and MA would probably have state tax rates of 50% by now.

Well yeah, that's the whole point of federalism.

awesome :)

What monsters. Next we're going to hear these parasites itemized their tax deductions!

This happens a lot of time for tax evasion (not avoidance) purposes but people don't realize that if they leave CA/NY after negotiations to sell stock have begun, they are still subject to tax on the sale in their original home states.

So what? Why is the New York Times even writing about this? They are free to do what they want with their money. They were early employees at companies that built products people liked and they were appropriately rewarded. This whole article reads like bait to get people jealous and upset at "those damn techies!". Sure enough if you look at the comments it seems to have worked.

How transparent does the NYT have to be in their desire to destroy the competition (the internet) before people stop reading it?