An increasing number of financial firms, especially private equity and hedge funds, are fed up with New York’s sky-high city and state tax rates and are relocating to the business-friendly climate in Florida’s Palm Beach County.
And they’re being welcomed with open arms. Officials in Palm Beach recently opened an entire office dedicated to luring finance hot shots down south.
“Florida is a state of choice,” said Thalius Hecksher, global development chief for Apex Fund Services, who moved many of his operations to Palm Beach. “It’s organically grown. There’s no need to drag people down here. It’s a zero-income-tax jurisdiction.”
“And the lifestyle!” Hecksher added.
Federal tax rates are the same in Florida and New York.
But there’s no state income tax in the Sunshine State. Compare that to New York, where the state and local governments took $14.71 of every $100 earned in 2010, according to state records.
The only state with a higher rate is Alaska.
And Florida residents lost 3.31 percent of their income in total taxes, versus New Yorkers, who pay just over 5 percent, according to the National Tax Foundation’s latest report, which used 2009 Census figures.
That’s a substantial difference in bottom line for those who stand to make millions of dollars a year in income.
Also, commercial property values are much cheaper in Florida, and New York City will likely become even less friendly to businesses when Mayor Bloomberg leaves office next year, hedge-fund executives said.
“You weigh all of the benefits for being here to those in New York, and they outweigh them every time,” said Evan Rapoport, CEO of HedgeCo.net, which is expanding its presence in Palm Beach County.
“This fiscal-cliff issue, with tax rates continuing to go up. We’re seeing where we’re going with taxes,” he said.
“In our industry, the people we’re talking about are $1 million-a-year earners. So when you’re talking about tax rates, it’s more meaningful.”
“Then,” he said, echoing Hecksher, “there’s the lifestyle issue.”
The demand is so high that officials in Palm Beach County have set up an entire office to answer questions from city hedge-funders looking to relocate.
“We’re not doing a multimillion-dollar marketing campaign. We don’t need to,” said Kelly Smallridge, who heads the Palm Beach County Business Development Board, which set up the special unit to handle inquiries and marketing.
“They’re coming to us. Without warning,” Smallridge said, her organization only recently started getting inundated with hedge-funders.
“The door was open because of the high-tax environment in the New York area”, Smallridge said.
“Smaller companies were moving completely out. Larger ones, looking for expansion opportunities, wanted to expand here,”she said while touting her group’s “free and confidential” consulting services.
The firms can easily pick up and move out of the New York region because technology allows them to do their work anywhere, she said.
That’s exactly what Hecksher whose company services hedge funds around the world did when he was looking to expand the firm’s US presence.
New Jersey-based Apex, he said, could easily have chosen Manhattan or Greenwich, Conn. but instead, the company followed the industry to the tax-friendly Sunshine State.