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Wealthy dodging taxes

By Judy Martel · Bankrate.com
Wednesday, June 30, 2010
Posted: 12 pm ET

It's probably not shocking that the wealthy try to avoid paying taxes on their fortunes. After all, trusts and other tax-avoidance and postponement tactics have been around for centuries.

But IRS data shows that the wealthy are going even further -- literally -- to avoid paying Uncle Sam. They're moving to states that have lower taxes, and, as an added benefit, warmer weather.

Collier County, Fla., is top of the list, home to the wealthy enclave of Naples. Florida doesn't have an income tax, and Naples has long been popular with Midwesterners. That still holds true as of 2008 IRS data, the latest available. Although slightly more people moved out of the area during that time, it's interesting to see who's moving out, and who's moving in. The average reported income of those departing the area was $26,128 per person, versus $76,161 for those entering the area.

Recent proposals for higher taxes on the wealthy are only going to force more creativity. The health care bill passed by Congress in March contained a 0.9-percent tax on income for couples earning more than $250,000, plus a 3.8 percent levy on investment income for those same high-earners. The second tax is perhaps more surprising because investment income previously wasn't subject to a payroll tax.

And there's more news swirling about the estate tax, which remains suspended until Congress acts. One proposal is calling for a 50-percent tax on estates between $10 million and $50 million, versus 45 percent for estates above the 2009 $3.5 million exemption per individual ($7 million for a couple), and 55 percent for estates above $50 million. Finally, an additional 10-percent tax is proposed for estates valued at more than $500 million.

What do you think about the proposed higher taxes on the wealthy?

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