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Any one thinking Geographic Arbitrage just became a lot more appealing

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  • Any one thinking Geographic Arbitrage just became a lot more appealing

    So with the recent tax changes, we docs living in high state/local income taxes and expensive mortgages and property taxes (Cali I am looking at you) are about to get a lot less tax deductions. So does geographic arbitrage become much more attractive? Anyone seriously considering a move because of tax reasons?

  • #2
    Would you mind defining geographic arbitrage?

    I've seen it used in different ways.  I guess the definition that makes the most sense to me would be to work in an area that pays more but live in a different area where the cost of living is lower.   In doing so you take advantage of the difference, thus the arbitrage.

    For example, I met someone once that lived in El Paso, TX who had a housekeeper that lived in Mexico across the border.  She would work in the USA for him for several days a week and then she would return to her home in Mexico the rest of the week.   I think that's pretty textbook case of arbitrage.  She is taking advantage of the differences in the markets between the US and Mexico.

    When physicians use the term, it seems what they mean is just moving to a lower cost of living area.  Now many of these lower cost of living places will actually also have higher salaries for a variety of reasons.  So it is an advantage to do this, but I think calling it arbitrage misses the essence of arbitrage.  Two different markets should be involved (and in different locations if we're calling it "geographic")

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    • #3
      Geographic Arbitrage used here in WCI is exactly that -- higher wages in LCOL areas -- which tends to be fly over country of the great plains.

      To EJ's point; single friends have brought up the idea; but none have made the decision to pull up the stakes.

      Some doing locums are seriously looking to to 6months out of Cali more seriously now though.

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      • #4




        Geographic Arbitrage used here in WCI is exactly that — higher wages in LCOL areas — which tends to be fly over country of the great plains.

        To EJ’s point; single friends have brought up the idea; but none have made the decision to pull up the stakes.

        Some doing locums are seriously looking to to 6months out of Cali more seriously now though.
        Click to expand...


        Well, as I explained that is poor usage of the term arbitrage, but I guess if that's what he means, then thanks for clarifying.

        It would just be easier to say moving to a LCOL area.  They generally have higher wages because they are under-served since most docs prefer not to live there.

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        • #5
          Choose your new tax home carefully. Some places without income taxes have high property taxes. Some states that are not low cost of living states have no state income tax (Washington).

          But sure, if you're not wedded to California, then get out. It was bad before and it's even worse now.
          Helping those who wear the white coat get a fair shake on Wall Street since 2011

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          • #6
            It just so happened we moved to PA from NYC a month ago. Not on purpose but couldn’t have been better timed. I paid close to 20k in SALT alone and not at a typical high physician salary.

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            • #7
              My property tax plus state income tax is $10000k.  No reason to move.  Tennessee has no state income tax but does tax investment income. (I believe this is being phased out.)  Texas has no state income tax but higher property tax.  I read in the WSJ this morning that Austin, TX is in the top 10 median property tax areas.  (I have family there.)

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              • #8




                My property tax plus state income tax is $10000k.  No reason to move.  Tennessee has no state income tax but does tax investment income. (I believe this is being phased out.)  Texas has no state income tax but higher property tax.  I read in the WSJ this morning that Austin, TX is in the top 10 median property tax areas.  (I have family there.)
                Click to expand...


                Its outrageous. Also have family there and the homes are now spendy and taxes are crushing. I guess arbitrage there is not owning a home to avoid taxes.

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                • #9
                  for my wife and i, geographic arbitrage has always been appealing.  no way would we just live where we live if we made the same money and had the same costs.   we could still benefit more, but i think we found our personal sweet spot.

                  however, we miss when we lived on the ocean and could see it every day from our home.  that was certainly nice.  we miss when we could step outside and see mountains.  however, we didn't actually go skiing or hiking or to the beach, so it's not as if we missed activities associated with those places.

                  ymmv.

                   

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                  • #10
                    People like living and working in California, so they put up with the taxes.

                    Property tax in Texas is a little higher but still far cheaper than paying state income tax in most states.  Plus there is some property tax on top of the income tax in other states.

                    If I were to move, it would be to Texas or Florida.  Maybe one day we'll buy a Florida beach condo and live there but that's pretty far out on the horizon.

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                    • #11
                      Washington is expensive, but outside of the west coast, there are some cheaper spots.  Spokane is very affordable.  Also, living on the south border in Vancouver and buying everything in Oregon (no sales tax) could overcome the higher housing costs there.  You can play the same game in El Paso and other Texas border towns, and in places like Chattanooga and Bristol in Tennessee.

                       

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                      • #12
                        Moving out of California isn't arbitrage. It's just moving out of California. We did it 15 years ago because it was too expensive and too crowded.

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                        • #13
                          Reno and Las Vegas are same for Californians.

                          What really will hurt are condos in snowbird and cottage/2nd home areas that aren't amenable to easy AirBnB-- FL and AZ probably will get big time dings.   Who knows, timeshares may get a resurgence with all this.

                           

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                          • #14
                            I keep thinking about moving to a LCOL area (live in mcol area now) but it's hard to take the 9 yo out of school and to leave all of our friends behind. I'd really like to move somewhere with more snow. But I don't know if I'd ever pull the plug. Doing locums and trying out different locations once both kids are out of the house is pretty appealing to me.
                            If I was in CA I'd definitely move, I don't know how people deal with the traffic and the high costs. But I do visit at least once a year ?

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                            • #15
                              I certainly wouldn't move just based on this law. Let me preface by saying I could not be less excited about the process that just took place, but the brackets are dropping as well. We are going to lose our second biggest deduction with this SALT stuff but we also have a big portion of our income in the top 2 marginal brackets.

                              My back-of-the-envelope calculations suggest a big push for us despite being high earners in a HCOLA (Chicago).

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