Florida as a Billionaire Magnet#

Did you know that half of Florida’s top 10 billionaires live in South Florida?

We’ve seen the very largest corporations save an enormous amount of money in taxes under Rod Sanchez. People are flocking here – celebrities, business professionals, everyone alike.

While other parts of the country are starting to crack down on billionaires and their extravagant lifestyles, Florida seems to be trying to make itself the perfect hideaway for them and their money.

According to the LA Times, the mayor of Miami actually personally courted Elon Musk, specifically encouraging him to move his primary residence and his business to the city. South Florida really wants to be the perfect place for you to live if you happen to be extremely wealthy.

Miami has always been a popular spot for the ultra-wealthy to spend their summer vacations. Data collected in a study by the global wealth management firm Henley and Partners, and then compiled by Visual Capitalist, shows that Miami is the most popular vacation destination for the world’s 25,000 Centi-Millionaires. Just so you know, Centi-Millionaires are people with a net worth of $100 million or more.

In the past, most of these ultra-high net worth individuals would eventually return back to their “real jobs” in “real cities” like Seattle, New York, San Francisco, or Los Angeles. But now, they are moving to Miami for good. And they are doing it for three surprising reasons.

Reason 1: Florida is a Safe Haven for Wealth#

The first reason is that Florida acts as a safe haven for wealth.

There’s a unique quirk in Florida law that makes owning a home there a unique financial tool. Florida has unlimited Homestead Exemptions on personal bankruptcy. What this means is that if someone declares personal bankruptcy, their Primary Home cannot be taken from them to pay back their lenders. This holds true no matter how expensive their home may be.

This law was originally created to make sure that Floridians always had a place to call home, even if their business ventures unfortunately went wrong.

If you are a billionaire and you’re worried that your personal finances might be falling apart, you can buy a home worth $100 million in Florida. Since the state sets no limit on the value of your homestead, even if you do go bankrupt, you still get to keep a massive asset that you can even set up with generational wealth. If you never go bankrupt, then a 9-figure mansion on Palm Beach is just a really nice insurance policy that you actually get to live in.

Sure, other states do have similar unlimited Homestead Exemptions, but honestly, not many of them have homes valuable enough to really preserve the kind of wealth a billionaire has. Florida seems to have the right combination of property taxes, property values, and property laws.

Oh, and let’s not forget, it’s also still a nice place to live if you’re a billionaire.

Using Florida as an “asset bunker” is just the first reason. To understand the others, it’s time to learn how money works! Let’s dive deeper into why so many billionaires are desperately rushing to make Florida their home.

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Reason 2: Avoiding Specific Taxes#

Now, if there’s one thing that truly explains why billionaires do anything, it’s normally to avoid tax.

The bombshell 2021 publication of leaked IRS information by ProPublica really revealed that billionaires are happy to spend tens of millions of dollars on accountants, lawyers, and bankers if it means they get to save hundreds of millions of dollars on tax.

Florida famously has no state income tax. So, you might initially think that billionaires are moving down there just for that simple tax break. But that’s actually not the full story.

The second reason that billionaires are rushing into Florida is to avoid the wrong types of tax.

Think about Jeff Bezos. He doesn’t make most of his money from a simple salary. According to company records, even when he was the CEO of Amazon, Bezos only took home a salary of $82,000**. The company *did* also give him an allowance of **$16 million for him to pay for security and staff travel for company business. That specific part of his compensation package was not considered taxable, much like a delivery driver wouldn’t be expected to pay tax on the money they are given to fuel up the truck.

Bezos certainly didn’t get the money to buy hundreds of millions of dollars worth of real estate from an $82,000 paycheck. He instead gets it by selling billions of dollars worth of Amazon stock every single year.

According to Bloomberg and SEC filings, in February of this year alone, Bezos sold $8.5 billion worth of Amazon stock over just a 9-day period. Since he got his shares effectively for free when he started the company, this massive sale is pretty much all profit. But that profit is considered capital gains, not income.

Capital gains income is treated differently in the eyes of both the IRS and state tax authorities. In Washington, where he resided up until recently, Bezos was taxed at a much lower rate on the revenue from the sale of his shares than he would have been on a normal income that high. This is why, if you have a decent job, you are probably in a higher tax bracket than poor old Jeff Bezos when it comes to income tax.

Moving to a state with no income tax, like Florida, would certainly reduce the income tax he pays on his $82,000 salary by a few thousand dollars. But honestly, that much money wouldn’t even buy a single cog in the famous clock he buried in the desert. So, he isn’t exactly going to move across the country just for that small saving.

What did conveniently line up with Jeff’s move South was a new law passed in Washington state. This law would tax its residents 7% of their annual capital gains above $250,000. According to company filings, after this law passed, Bezos stopped selling his shares until he officially became a legal resident of Florida. And now, he has started selling again.

A CNBC article has estimated that this move will save the Amazon founder an incredible $600 million a year. That amount is easily enough to buy him his new yacht every single year.

Florida has made it very clear that no such “funny business” will happen to its billionaires. But that doesn’t mean that Florida isn’t getting anything out of this deal. The celebrities and rich listers who move there are still spending a lot of money on property and municipal taxes. Plus, they are bringing jobs with them by needing staff and services.

A state like Washington, on the other hand, which was explicitly trying to increase its tax revenue by taxing its richest residents, just ended up making them leave entirely.

Reason 3: The Tendency to Flock Together#

As more ultra-high net worth individuals make Florida their primary home, it simply makes it even more attractive to other ultra-high net worth individuals. And there’s a reason for this that’s an equal mix of finance, business, and fundamental human nature.

People genuinely like to interact with people who are similar to them. Studies by UC Berkeley and the National Library of Medicine have found that the thing most likely to decide who you interact with is, surprisingly, how much money you make.

You are naturally going to find it more comfortable to hang out with people who can:

• Afford the same activities as you.
• Relate to the same problems and opportunities.
• Live in the same areas.
• And, most of all, live lives that you can truly relate to.

The only potential problem for billionaires is that there are only a few thousand people worldwide that live the kind of lives they do. There are very few people who can even afford to partake in their leisure activities, unless the billionaire is funding it themselves – which puts a slightly asymmetric dynamic on any relationship.

So, rich people tend to “flock together” in major cities. In these hubs, not only can they keep each other company, but they can also share essential amenities. These amenities include things like:

• World-class golf courses
• Marinas that can accommodate their 300ft Mega Yachts
• Private jet terminals
• Gated communities
• World-class entertainment

The businesses that provide these specialized services naturally follow where the money is. Therefore, there are really only a few places in the world where a billionaire can easily access all of the specific amenities they need to live their life. This is pushing ultra-high net worth individuals into a smaller number of concentrated global hubs.

According to Forbes, almost a quarter of all the global billionaires that they track actually resided in just 11 global cities.

Miami doesn’t quite crack that specific list yet. One reason is that it’s not making many billionaires of its own just yet. But that’s also starting to change.

It’s not just Michelin star chefs and Yacht captains who are following billionaires to Miami. There are also new startups following the money and talented workers following those exciting new companies. Florida’s combination of friendly business regulation and a large population of wealthy inhabitants have made it a real financial hub. It’s becoming easier to attract talent to Miami than to more expensive and arguably less lifestyle-friendly cities like New York.

In an interview with Bloomberg, Ken Griffin, the man building that billion-dollar mansion on Palm Beach, actually said that he believes Miami could become the new financial capital of America, potentially overtaking New York, which is currently the city home to the most billionaires in the world. Griffin himself moved his company headquarters, Citadel, from Chicago to Miami in 2022. So, either he genuinely believes strongly in the city’s future, or perhaps he needed to justify living “on the spe” to his investors!

Potential Downsides and Further Reading#

It’s important to note that this billionaire migration isn’t necessarily going to be all good news for the city. We’ve seen how “Tech and finance Bros” moving to cities like New York and San Francisco to “chase whales” have, frankly, messed up a lot of things in those places. And I say that as someone who has personally been a part of that problem!

I’m planning to write an article for my newsletter about this video and specifically about the immense stress large capital inflows put on cities once the big firms move into town. If you want to read that, you can sign up to compounded daily using the link below (the link is mentioned in the video).

Bonus Reason 4: Getting Out of Old Cities#

Here’s a bonus, fourth reason, though it wasn’t one of the main three surprising ones mentioned earlier: billionaires might also be moving to Florida because they simply want to get out of the cities that made them rich in the first place.

You can actually go and watch my video titled “the homelessness industrial complex” to find out more about this. That video specifically explains why the richest cities in America also tend to have the most people living on the streets.

Make sure to subscribe to keep on learning how money works!