If you're saying that anyone who was professionally successful in California has no right to ever leave the state, that seems like a tough sell.
I left California for Nevada many years ago, and I subsequently sold stock I accumulated while in California without paying state income tax.
It is legal and you can do it, but there are a lot of legal hurdles. They're pretty well documented around page 5 of FTB 1031 [1].
In my case, I quit my W2 job in California, entered into a contract to lease a home in NV, got rid of all leased or owned real estate in CA, sold or re-titled all motor vehicles from CA, registered to vote in NV, surrendered my CA driver license for a new NV license, re-titled all my financial accounts at my new address, got a NV phone number, etc.
This was all easy because I was single without children. If my situation was more complicated, like I had a spouse or ex-spouse with children enrolled in CA schools, or decided to retain owned real estate in CA, the situation can quickly fall into a gray zone.
If you have a W2 job in CA while claiming you're in NV, it's very hard to escape the CA FTB.
CA is very aggressive about chasing down its former residents. It's important to check all the boxes to get them from chasing you.
After I left, I filed non-resident CA returns for three years basically saying, "I had income but I am not a resident and it was not from a CA source, therefore I owe no CA tax." This is important because it starts the statute of limitations running. If you don't file, the statute of limitations doesn't start.
And while I'm writing all this: what in the world is up with a 13.3% state tax bracket? Screw California.
[1] https://www.ftb.ca.gov/forms/2019/2019-1031-publication.pdf
And AZ isn't NV. The FTB pays special attention to NV in particular because it has no income tax. Someone who moves to AZ isn't so obviously trying to skirt CA state income tax.
My case was a little special because I sold a lot of stock right after leaving CA, which makes it a little suspicious to the FTB.
If you move from California to another country, and are subject to US Federal Income tax, and don't qualify for an exemption, the Franchise Tax Board still considers you a resident of the state, and as such, taxes you on your worldwide income; as you did not end your residency by establishing residency in another state.
Income taxes has so many bad consequences. It would be great to ban it and replace it with land value taxes.
[1] https://www.pewtrusts.org/en/research-and-analysis/blogs/sta...
While this is strictly correct, I think the implications of what you wrote are too strong. If you move from California to another country or U.S. state, the requirements to get an "exemption" from California tax residency are essentially "convince the FTB that you have weaker ties to California than to your new location."
While arbitrary and open to abuse in theory, it appears less so in practice. Quoting from California's Guidelines For Determining [Tax] Resident Status [1], heading "Leaving California" on page 6:
> Example 4 - You and your spouse/RDP are California residents. You accept a contract to work in South America for 16 months. You lease an apartment near the job site. Your contract states that your employer will arrange your return back to California when your contract expires. Your spouse/RDP and your children will remain in California residing in the home you own.
> Determination: You maintain strong ties with California because your spouse/RDP and children remain in your California home during your absence. Your intent is to return to California, and your absence is temporary and transitory. You remain a California resident during your absence. You are taxed on income from all sources, including income earned in South America.
> Example 5 - You receive and accept a permanent job offer in Spain. You and your spouse/RDP sell your home in California, pack all of your possessions and move to Spain on May 5, 2019, with your children. You lease an apartment and enroll your children in school in Spain. You obtain a driver’s license from Spain and make numerous social connections in your new home. You have no intention of returning to California.
> Determination: You are a part-year resident. Through May 4, 2019, you were a California resident. On May 5, 2019, you became a nonresident. All your income while you were a resident is taxable by California. While you are a nonresident, only income from California sources is taxable by California.
> Example 6 - You are a resident of California. You accept a 15-month assignment in Saudi Arabia. You put your personal belongings, including your automobile, in storage in California. You have a California driver’s license and are registered to vote in California. You maintain bank accounts in California. In Saudi Arabia, you stay in a compound provided for you by your employer, and the only ties you establish there are connected to your employment. Upon completion of your assignment, you will return to California.
> Determination: You have maintained greater connections with California than you have established in Saudi Arabia. Your absence is for a temporary or transitory purpose. Therefore, you remain a California resident. As a California resident, your income from all sources is taxable by California, including the income that you earned from your assignment in Saudi Arabia.
Example 5 above is closest to what I think you were talking about by "moving from California to another country." The only way I think FTB could go after you for here is to argue that you could have an "intention" of returning to California eventually, and I do not know whether keeping your American bank accounts at California banks would be enough of a hook for FTB to decide it's worth the effort to try that argument.
For myself, if I did move from California to become an indefinite expat, I wouldn't worry too much about the FTB going after me. Opinions may vary, of course.
[1] CA FTB Publication 1031, 2019 edition: https://www.ftb.ca.gov/forms/2019/2019-1031-publication.pdf
FTB can use 'has a storage unit in California' as a factor; and maybe combined with California banks and California voting, and maybe a California mailing address, if you use friends/family to forward your mail, could be enough to tip the scales for them. It's rather opaque.
I don't think it's a small motivation of Musk to escape the tax rate when he starts to sell his shares. Just because he vested them while in CA - if he's a resident of Texas when he sells I don't think he owes CA a dime.
It depends on what type of shares/options/equity grants, and what's still vesting, and what isn't.
ISOs that are exercised in a qualifying disposition are taxed based on residency on the day of exercise.
RSUs that vest while you're a resident are taxed on vest day, and any capital gains from that are taxed based on residency on the day of the sale, yes.
RSUs that vest while you're not a resident are taxed on vest day, and a portion of the income will be california source if you worked in California during a portion of the vesting period, or if you were a residing during a portion of the vesting period.
https://www.ftb.ca.gov/forms/misc/1004.html#E-Restricted-Sto...
You make it sound like if you ever lived in CA you have to pay CA tax for the rest of your life until you retire lol.
But, as much as i am a lefty(+capitalist), that seems a fault of the state. States should expect this more imo. You give near negative returns to companies to come to your state and then you're shocked when they leave and you haven't gotten your ROI?
But maybe this will be good. If the migration continues perhaps California will have to stop subsidizing low-tax states and let them fend for themselves more.
Does California invest money/resources to companies? Or is it more of an indirect thing, such as maintaining roads and bridges?
Why are businesses choosing to hop off the California gravy train? Is the gravy not worth the taxes? Is the gravy just hyperbole?