November 8, 2023

Jeff Bezos’ Move to Florida Highlights Tax Consequences for Washington State

By John Bonk, Partner, National Co-Leader - State & Local Tax

Jeff Bezos’ Move to Florida Highlights Tax Consequences for Washington State State & Local Tax

The recent announcement of Jeff Bezos, the founder of Amazon, relocating from Washington to Florida has sparked discussions about the impact of taxes on high-net-worth individuals and the potential consequences for the state of Washington. Bezos’ move not only allowed him to avoid the recently enacted Washington capital gains tax but also shields his wealth from the state’s proposed wealth tax and estate tax. This article explores the implications of Bezos’ move and the risks of relying heavily on a small number of taxpayers for tax revenue.

By selling approximately $15.7 billion worth of Amazon stock before the new state capital gains tax took effect, Bezos saved nearly $1.1 billion in taxes. Relocating to Florida ensures that future stock sales won’t be subject to Washington’s capital gains tax, providing Bezos with significant tax savings.

Washington state officials have been considering wealth tax proposals, which can have economically damaging effects. An earlier version of the proposal targeted billionaires and relied heavily on a small number of individuals from Amazon and Microsoft for revenue. The latest proposal imposes a 1% tax on tradeable net worth above $250 million and still relies on a small group of wealthy residents for the bulk of the revenue.

Based on his current net worth, Bezos would have been liable for approximately $1.44 billion a year under the proposed wealth tax, accounting for 45% of the projected revenue. Bezos’ decision to move to Florida eliminates potential wealth tax collections worth nearly half the official estimate, highlighting the risks of heavily concentrating a tax on a few highly mobile individuals. If the tax were adopted, other high-net-worth individuals might also consider relocating.

Bezos’ move to Florida also shields his heirs from Washington’s highest-in-the-nation estate tax, which has a top rate of 20%. By moving, Bezos ensures that his estate will not be subject to this tax, preserving a significant portion of his wealth for future generations.

Targeting the wealthy for high levels of taxation may have political appeal, but it can have unintended consequences. Many states have experienced the loss of high earners and high-net-worth individuals due to excessive taxation, resulting in a decline in tax revenue and economic activity. Washington’s heavy reliance on a small number of taxpayers choosing to stay put exposes the state to potential revenue loss if more individuals follow Bezos’ lead.

Jeff Bezos’ move from Washington to Florida highlights the tax consequences for high-net-worth individuals and the potential risks for states relying heavily on a small number of taxpayers. Bezos was able to avoid the Washington capital gains tax, proposed wealth tax, and estate tax by relocating. The implications for Washington serve as a reminder of the dangers of designing tax systems that heavily concentrate on a few individuals and the importance of considering the potential consequences when implementing tax policies.