Marching Off a Cliff

Abstract

Over the past century, Florida has grown and prospered largely due to a constant influx of wealthy retirees. The state has achieved this status not by accident, but rather by design. For nearly a century, Florida has worked to position itself as a domestic tax haven. By exploiting its senior-friendly climate and completely avoiding unpopular income and estate taxes, the state has attracted an influx of wealthy retirees.

In this election year, state leaders across the country seem intent on emulating Florida's retiree-friendly tax policies as a way to attract and/or retain their most wealthy elderly residents and pave the way for future prosperity. However, state leaders following this strategy may be on the path to ruin. There simply aren't enough wealthy retirees to go around. Florida's strategy works only if just a few states pursue it — if a few select governments successfully siphon off wealth from other states. Once Florida's strategy is replicated elsewhere, it loses its magic everywhere. Blinded by the popular media and yielding to current political pressures, modern state leaders seem unable to comprehend this weakness in Florida's growth model. This article seeks to explore the futility of other states' following Florida's lead and proffer an alternative model from the pages of history. Eighty years ago, an upstart Florida first sought to use state estate taxation as a marketing tool. In market contrast to the current political environment, other states met this prior effort not with envy but with indignation, while a progressive Congress worked to undermine Florida's efforts.

The article concludes that state governments should consider the true fiscal consequences of emulating Florida, while Congress should endeavor to promote the states' mutual salvation.

Keywords: state estate taxes, death taxes, estate tax, Florida, interstate competition

JEL Classification: H20, H70, H71, H72, H73, H77, J11, J14, J18, K34