Fisher Investments becomes the latest example of high taxes driving people and businesses away

The seemingly abrupt decision by Fisher Investments to relocate its headquarters from Camas, Washington, to Plano, Texas, might not have been abrupt after all, but it does reflect a larger trend of companies and wealthy individuals migrating away from high-tax municipalities.

In the briefest possible manner, the $197 billion RIA issued a press release Friday evening summing up its relocation in a single sentence by taking a swipe at Washington’s tax treatment for capital gains.

“In honor of the Washington State Supreme Court’s wisdom and knowledge of the law, and in recognition of whatever it may do next, Fisher Investments is immediately moving its headquarters from Washington State to Texas,” the release read.

The 44-year-old advisory firm did not respond to a request for comment for this story, but according to published reports, more than 1,200 of the advisory firm’s 4,200 employees are already based in the Dallas-Fort Worth area.

And Ken Fisher, the RIA’s 72-year-old founder, as well as Chief Executive Damian Ornani each reportedly have homes in Dallas, Texas.

In 2015, Fisher Investments moved its headquarters to Washington from Woodside, California.

While the company issued a statement on Monday suggesting taxes weren’t the only reason for the relocation to Texas, the initial trigger point has been traced to a Friday ruling by Washington’s Supreme Court to uphold a 7% capital gains tax on the sale of financial assets, including stocks and bonds.

The tax was initially approved by lawmakers in 2021 but had faced legal challenges regarding its constitutionality as a property tax that exceeds the state’s 1% limit.

Neither Washington nor Texas has a state income tax, but the Washington capital gains tax is being interpreted as a version of an income tax and a foot in the door for more to come.

“Texas has seen a lot of migration from states that are implementing various forms of wealth taxes,” said Ed Curtis, chief executive of YTexas, a business recruiting firm.

Texas has been the beneficiary of several high-profile corporate relocations, including Charles Schwab Corp., which moved to Texas from California in 2020.

Curtis said the pace of businesses moving to Texas picked up during the pandemic and hasn’t let up since, a trend he partially attributes to taxes.

“During the last legislative session in Texas, they had it clearly stated it will be almost impossible to introduce a state income tax here from any angle,” he said. “We don’t have a state income tax in Texas, and we never will.”

The trend is even more pronounced at the advisor level, where it is becoming increasingly common to see clients relocate across state lines to save on taxes.

“I have had multiple clients relocate to Florida in the past couple years,” said Kevin Brady, vice president at Wealthspire Advisors.

“The reasons they considered and executed the change in tax domicile is not unique or a mystery, particularly for those in New York City where there is both state and local income taxes and a state estate tax to contend with,” he added.

Matt Chancey, a tax specialist at Coastal Investment Advisors, has had clients relocate from California and New York to Florida, Texas, Tennessee and Puerto Rico.

“I wouldn’t say it was 100% for tax reasons since these places also have nice areas for high-net-worth clients to live, favorable weather and a different political landscape, but taxes were certainly part of the decision,” he said. “Wealthy clients are portable and can relocate and many of them will. State politicians keep thinking you can tax the rich to no end and that just isn’t the case. Domestic migration for tax reasons is another example of free markets at work.”

Vance Barse, owner of Your Dedicated Fiduciary, which relocated from California to Texas two years ago, said taxes are continuing to drive decisions about where people work and live.

“People vote with their feet, which is not a new concept for humanity, but something that became amplified during Covid when certain states like California were strictly shut down while others like Texas were largely open,” he said. “I can speak from experience, given that we had a newborn and a toddler when Covid hit and all our sitters moved out of state, we needed to be closer to family for help. We expanded our footprint in Texas by buying a home there, which was dirt cheap at the time because it was before the mass exodus out of California.”

Barse said the historically high inflation has become a “regressive tax” that makes states with lower tax rates even more attractive.

“For many, the tax savings offered by a zero-state income tax state like Texas not only helps offset higher goods and labor costs, it can also be beneficial for employees given that there’s no state income tax,” he said.

It’s a similar story at Fidelis Capital in Tampa, Florida, where founding partner Paul Ayotte said, “It’s becoming an easier decision to benefit from moving to states like Texas and Florida.”

In terms of why every state and municipality can’t just follow the model of the states benefitting from the migration, Fidelis founding partner Rick Simonetti offered a cold dose of reality.

“They’ve got to get the money somewhere,” he said. “So it ends up being a bit of a balancing act.”

Related Topics: capital gains taxes, Fisher Investments, Taxes