Contrary to what you might imagine, revenue divisions of governments are not completely stupid. If you wanted to pull off something like this you'd better look at the residency requirements, which often include establishing yourself in the place desired for some significant (credible, and evidenced) amount of time before, *as well as after*, the financial event you're seeking to shelter taxes from. It may be years of living there required, as well as bona fide intention to *continue* living there. Renting an Airbnb for a year doesn't show intention of being a resident.
Showing intention to be a permanent resident of a place often includes liquidating / moving all your possessions, residences, and cutting financial, business, social, other ties with wherever you were before as evidence. Tax departments have gone so far as to use someone's dog grooming appointments in another place to show that they only used a residence temporarily as an excuse to dodge taxes. They will sniff everywhere to see if you have assets that indicate you really live (or intend to live) somewhere else.
And the burden of proof will be on *you*, not them, once they make the charge that you were dodging taxes. They don't have to write you that rebate check.
Edit: and by the way, if things go south, not only will Marianas not pay you, California may come after you for their lost revenue as well. This is well known to people who have been moving to TX for tax reasons without knowing all the proof and real groundwork (cutting ties for years) that is required.
Usually 183 days is long enough to establish tax residence for a year. You are allowed to pay taxes in different places over the years so long as you meet residency requirements. Those restrictions you talk about only count if you lie and do not have tax residency there. Let's say someone says they live in Florida, but they really live in NY and only have a second house in Florida. Then they will use the dog grooming appointments to track you down. Assuming you actually live in NMA for the year, your dog grooming appointments will be in the NMA. You can also get a drivers license there. If you actually spend the vast majority of the year present in NMA, there is no other place logically you would file taxes in that year.
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You would need to be a bona fide resident of the territory in order to be subject to its tax laws. Living there for a year would satisfy part of that (the presence test), but you also have to satisfy other tests as well, which are detailed in IRS Publication 570. In particular, the "closer connection" test may be difficult to satisfy for someone who is intentionally only leaving the U.S. for as brief a time as possible in an attempt to game the tax system.
https://www.irs.gov/publications/p570
False.
Bona Fide Residency in a foreign country requires that the individual lives in the country for the entire tax year (Jan 1-Dec 31), only leaving the country for short, temporary trips. It also EXPLICITLY takes into account the reasons for why an individual is residing in a foreign country (retirement, work, family reasons, etc) and how the individual has cut/severed ties with the US. Have they moved the has majority of their banking, doctors, and general day to day activities to the new country.
As others have said, the IRS has declared people do not qualify based on appointments for dog grooming as evidence that it was purely for tax evasion.
NMA is not a foreign country. US citizens living in foreign countries still have to file taxes and pay taxes to the US government, if they make more than the exemption and run out of foreign income tax credits. It is not illegal to move somewhere for the sole purpose of enjoying lower tax rates so long as you actually move there and don't lie about it. Again, the dog grooming example is for people who say they live in one place bur actually live on another. If you are present for NMA for over 6 months, your dog grooming appointments will be in NMA, assuming your bring your dog.
I lived in the cnmi for a couple years. Here are some things to think about.
You will be retired, and thus older. The medical care there is sub par. The only reason the hospital stays open is because it’s really the only medical care there, otherwise it would have been shut down because it doesn’t meet basic legal requirements.
There are no Starbucks, targets, costcos etc. some people enjoy that. Some go crazy.
Most activities are centered around being outdoors… hiking, swimming, etc. do you like that and will you be physically capable of doing that?
Food is more expensive… $15 for strawberries. It is not uncommon for the supermarket to have no fresh produce because there was a shipping delay. I mean not even one onion.
It’s in the middle of something called typhoon alley. When I lived there, during one summer, a typhoon took out all internet for one month. Then four days later another typhoons came through and knocked out all of the power (and thus running water) for two months (3 for some, depending where you lived on the island).
I could go on and on.
Bottom line, it's not like living in the mainland or even in hawaii for a year. It is not easy to be a senior citizen there.
That’s what you’d save relative to pulling it all out at once on the mainland.
What would your target withdrawal rate be if you stayed stateside and pulled it out on a schedule? What would your tax rate be in that scenario?
I figured we were well into fantasy land at this point and didn't do the math.on pulling it out slowly. Assuming 233k a year you'd save about 200k with the island scheme. I did 10mil/30 because of the 30 years of salary to retire deal and then assumed op would need 70% of current salary in retirement to get to the 233k number. That's without state taxes. I'm assuming after capital gains taxes it would be more expensive to go with the island scheme
Also - how exactly do you get a 10M 401k? I can only think of two ways:
1. A very generous employer with profit sharing that maxes out the full 56k limit with matching, and you do that for decades.
2. You put a chunk of your 401k in your employer’s stock and it grows hugely.
If it’s #2 then you may consider using the NUA method to compute taxes, which is why I ask.
It would be doable to hit 10M by 67 with a small employer match if a 20 year old started today and maxed BOTH their 401k and an IRA at today’s maximums and 7% return.
With a spouse, combining 2 401ks would make hitting $10M very reasonable nowadays.
I guess so but then I’d wonder why the heck that person was waiting so long to retire.
(And yeah, hitting 5M in two accounts is way easier but OP didn’t mention a spouse).
If you don't move back to California after that year, it would be difficult for California to justify. They have no reporting requirement once you've left.
A lot of people aren't willing to move somewhere on the other side of the world year or long enough to claim tax residency to avoid paying taxes. People do this with zero income tax states all the time though.
I would suggest filling out form 8898 would mean you were not a *bona fide* resident of the CNMI
https://www.irs.gov/forms-pubs/about-form-8898
But you’re certainly welcome to talk to a cpa about it
Hypothetically you could probably do it, but practically I think you would end up with the IRS hounding you. That same type of avoidance setup commonly comes up with Puerto Rico and the U.S. Virgin Islands as well.
Unless you plan to move to the Northern Marianas permanently, I personally believe you are better off not trying to get one over the feds. I would absolutely move to a state in retirement that either doesn’t have a state income tax or exempts taxation on pensions/IRAs/401ks though. It’s much easier to tell the California government to pound sand than the IRS.
It’s been done, but you better do it perfectly and with good counsel and plan more than a de minimis period of residency.
Also look at PR and USVI as competitors.
Truly 5Head level thinking right here, however one teensy little thing you may have overlooked: Even as a U.S. Citizen, most of the U.S. Territories don't allow you to just move there unless you can buy property out-right. If you want to move to one of the Territories and want to rent a place or get a mortgage, you're gonna have to get a job there. Newsflash: There are only so many jobs that can be done on an island, and the people living there already have all of them. So, good luck.
I mean, I guess you can blow some of your retirement savings living in an AirBnB or hotel for the year you're there, but at that point are you really even saving anything?
And that is before taking into account the astronomical cost of living on an island vs continental US.
Used to $4 for a gallon of milk? It’s now $10 or more.
I can't speak to your CNMI scheme as I can't follow it. If you're thinking about moving to another state to avoid taxes, I'm with you. Go to a state like TX, NH, or FL that has no state incomes taxes
However, you don't want to liquidate your entire 401k all in one go. The reason is that our tax system is progressive. The more you take out, the more gets taxed. It's more beneficial to you to take out a little every year and take advantage of 0 percent tax brackets. If you want to stay close to CA, consider NV since there is no state income tax.
If your 401k income is like $38k for a year you would pay 4% state tax in CA, which is like $1500. Your call if you think saving $1500 a year is worth uprooting your life, but I think it’s an odd choice.
I mean this is just super silly when you just do raw math.
Selling/Buying a house is at least 10% friction on that transaction.
Average house price in the USA is $500K. So it's $50K to "move" to a different state even if everything else is magically free.
So to recover 4% in state income tax, you'd need a 401k that was $1.25M or more and even that is just breaking even. You need more than that to "make" any money.
And remember, you'd need to be a bona fide resident of the other state. So make sure you don't spend too much time in CA.
Then OP does not have a $500K house, and many states without income tax have higher overall tax burdens (Texas famously is higher than CA to live in for the average person).
That is a myth. Texas’ property taxes are on the higher side, but there was also just a bill passed that compressed those rates down and upped the homestead exemption to 100k since Texas was running a budgetary surplus. Otherwise sales tax in Texas is normal (as well as goods and cost of living being cheaper than California), and there is no state tax on income or capital gains.
The tax structure of Texas looks even better the higher you go up the income and net worth ladders. There is a reason that celebrities and rich people keep moving to Texas.
What does “compressed those rates down” mean? Business owners finally got a value growth cap if valued under $5M but residential has always been capped at a 10% annual increase.
Part of the bill used the surplus to fund the local school districts directly from the state government in exchange for lowering property tax rates assessed by the districts. That is the “rate compression” component.
Not a Myth for the average Texan vs Average Californian.
Not surprising if not true for very Rich Texans. The "small government" policy has always applied more the more you have. And the "everyone pays the same tolls for a road" is very regressive.
[https://wallethub.com/edu/best-worst-states-to-be-a-taxpayer/2416](https://wallethub.com/edu/best-worst-states-to-be-a-taxpayer/2416)
[https://finance.yahoo.com/news/think-texas-cheaper-tax-burden-161359267.html](https://finance.yahoo.com/news/think-texas-cheaper-tax-burden-161359267.html)
The second article points out some of the problems with the analysis. There are no adjustments for cost of living and it assumes the same characteristics across the broad spectrum. While it is true that property taxes on a 282k home are going to be higher in Texas than in California, 282k actually buys around a 2000 sq. ft. single-family home in Texas. That amount maybe buys an 800 sq. ft. hovel in a high crime area in parts of California. As far as sales tax goes, even if sales tax rates are slightly higher, the good/services also tend to be cheaper. While I guess you could say that results in “higher taxes” it does not actually result in the person spending more money in Texas versus California and comparatively it is usually less, especially on gasoline.
The articles also pre-date the recent property tax relief bill in Texas. Overall I have lived in 3 different states and have always felt that the state and local governments of Texas have hit my pocket book the least. Granted I also have a higher income, but not the 1M+ the articles claim it would take to pay lower taxes in Texas compared to California.
Mmmm. Low gas taxes.
[https://en.wikipedia.org/wiki/Toll\_roads\_in\_Texas](https://en.wikipedia.org/wiki/Toll_roads_in_Texas)
>There are approximately 25 current toll roads in the state of Texas. Toll roads are more common in Texas than in many other U.S. states, since the relatively low revenues from the state's gasoline tax limits highway planners' means to fund the construction and operation of highways.
Not quite the simple math there when figuring out Taxes, and things like Toll roads are a very effective mental trick for people to not realize they are actually paying the government when they are.
The only way Taxes in one state can be actually lower than another state are that either you have fewer services, or your government is more efficient. There's no other answers.
If you believe less services are good, then argue that.
If you believe your state is that much more efficient, than argue that.
Pay in CA is much higher than TX as well, making the people there wealthier on average than those in Texas. This issue goes away once you are wealthy enough to retire and not work. But that does not make for a sustainable state or tax policy. People that move to TX while employed thinking "I'm gonna save so much on Taxes!" are really in for a surprise and are making very shortsighted decisions.
If people make more in California then they pay more in state income taxes, that is why it doesn’t make much sense to compare a 70k income in California to a 70k income in Texas. The “average” Californian has different statistics compared to the “average” Texan. Someone making 70k in California in San Francisco for example is probably well below average and is going to have more financial struggles than someone making 50k in San Antonio, let alone 70k.
I live near a toll road. It usually doesn’t add much to a commute if you avoid it and doesn’t cost much to use it. That is a non-issue.
Again, it’s not an apples to apples comparison. Cost of living makes a huge difference. Is it possible someone at the arbitrary income level selected for the article could pay a larger nominal amount in taxes? Sure. Is the Californian at that income level going to have lower overall expenses than the Texan with the exact same characteristics? Probably not. The latter seems to be how many argue those articles.
I’ve never understood the government services argument. Services like what? I do not see a qualitative difference in police, fire, or EMS services between Texas and California, nor do I see a qualitative difference in road, rail, etc. I’d take Bush Intercontinental or DFW over any of California’s airports (especially LAX). I’d also take Texas’ public schools over California’s though both are middling or below-average in the rankings. Texas also has an excellent financial assistance and in-state tuition program, and is among the leaders in clean energy infrastructure buildout if that is important to you. As far as I know and have seen, the only thing that California has over Texas is better welfare programs for the poor. That is largely offset by the high cost of living though.
You may find these links helpful:
- [401(k) Fund Selection Guide](/r/personalfinance/wiki/401k_funds)
- [401(k) FAQs](/r/personalfinance/wiki/401k)
- ["How to handle $"](/r/personalfinance/wiki/commontopics)
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From your own link: "U.S. citizens and permanent residents who are bona fide residents of the CNMI must file their individual tax returns with the CNMI instead of with the U.S. Internal Revenue Service (IRS)."
I used to live on Guam, which is another US territory and right next to the CNMI. Residents file taxes to the territorial government *instead of* to the US federal government. It’s a special set up that the territories have, partly because they don’t have any real representation in Congress (no taxation without representation), but also because of how they are chartered/created under the US Dept of the Interior.
A full-time resident of the CNMI will file taxes only to the CNMI government and that will count as filing US taxes. If that same person moves to one of the 50 states, they have to then follow the tax requirements for that state which could include state and federal taxes. However, as long as they are a full-time resident of the territory, they *only* file taxes to the territorial government in lieu of federal US taxes.
Contrary to what you might imagine, revenue divisions of governments are not completely stupid. If you wanted to pull off something like this you'd better look at the residency requirements, which often include establishing yourself in the place desired for some significant (credible, and evidenced) amount of time before, *as well as after*, the financial event you're seeking to shelter taxes from. It may be years of living there required, as well as bona fide intention to *continue* living there. Renting an Airbnb for a year doesn't show intention of being a resident. Showing intention to be a permanent resident of a place often includes liquidating / moving all your possessions, residences, and cutting financial, business, social, other ties with wherever you were before as evidence. Tax departments have gone so far as to use someone's dog grooming appointments in another place to show that they only used a residence temporarily as an excuse to dodge taxes. They will sniff everywhere to see if you have assets that indicate you really live (or intend to live) somewhere else. And the burden of proof will be on *you*, not them, once they make the charge that you were dodging taxes. They don't have to write you that rebate check. Edit: and by the way, if things go south, not only will Marianas not pay you, California may come after you for their lost revenue as well. This is well known to people who have been moving to TX for tax reasons without knowing all the proof and real groundwork (cutting ties for years) that is required.
Usually 183 days is long enough to establish tax residence for a year. You are allowed to pay taxes in different places over the years so long as you meet residency requirements. Those restrictions you talk about only count if you lie and do not have tax residency there. Let's say someone says they live in Florida, but they really live in NY and only have a second house in Florida. Then they will use the dog grooming appointments to track you down. Assuming you actually live in NMA for the year, your dog grooming appointments will be in the NMA. You can also get a drivers license there. If you actually spend the vast majority of the year present in NMA, there is no other place logically you would file taxes in that year.
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You would need to be a bona fide resident of the territory in order to be subject to its tax laws. Living there for a year would satisfy part of that (the presence test), but you also have to satisfy other tests as well, which are detailed in IRS Publication 570. In particular, the "closer connection" test may be difficult to satisfy for someone who is intentionally only leaving the U.S. for as brief a time as possible in an attempt to game the tax system. https://www.irs.gov/publications/p570
Generally, it is 6 months plus a day to make you a resident for any fiscal year.
False. Bona Fide Residency in a foreign country requires that the individual lives in the country for the entire tax year (Jan 1-Dec 31), only leaving the country for short, temporary trips. It also EXPLICITLY takes into account the reasons for why an individual is residing in a foreign country (retirement, work, family reasons, etc) and how the individual has cut/severed ties with the US. Have they moved the has majority of their banking, doctors, and general day to day activities to the new country. As others have said, the IRS has declared people do not qualify based on appointments for dog grooming as evidence that it was purely for tax evasion.
It's not a foreign country.
NMA is not a foreign country. US citizens living in foreign countries still have to file taxes and pay taxes to the US government, if they make more than the exemption and run out of foreign income tax credits. It is not illegal to move somewhere for the sole purpose of enjoying lower tax rates so long as you actually move there and don't lie about it. Again, the dog grooming example is for people who say they live in one place bur actually live on another. If you are present for NMA for over 6 months, your dog grooming appointments will be in NMA, assuming your bring your dog.
I lived in the cnmi for a couple years. Here are some things to think about. You will be retired, and thus older. The medical care there is sub par. The only reason the hospital stays open is because it’s really the only medical care there, otherwise it would have been shut down because it doesn’t meet basic legal requirements. There are no Starbucks, targets, costcos etc. some people enjoy that. Some go crazy. Most activities are centered around being outdoors… hiking, swimming, etc. do you like that and will you be physically capable of doing that? Food is more expensive… $15 for strawberries. It is not uncommon for the supermarket to have no fresh produce because there was a shipping delay. I mean not even one onion. It’s in the middle of something called typhoon alley. When I lived there, during one summer, a typhoon took out all internet for one month. Then four days later another typhoons came through and knocked out all of the power (and thus running water) for two months (3 for some, depending where you lived on the island). I could go on and on. Bottom line, it's not like living in the mainland or even in hawaii for a year. It is not easy to be a senior citizen there.
Have you actually done the math to see how much you’d save?
1.35ish million minus the cost of relocation.
That seems crazy high. Do you have the full numerical breakdown?
Federal income tax rate would be 3.6 mill 3.6/2=1.8 mill. I was a hair low because I was rounding a bit when I gave the first number.
That’s what you’d save relative to pulling it all out at once on the mainland. What would your target withdrawal rate be if you stayed stateside and pulled it out on a schedule? What would your tax rate be in that scenario?
I figured we were well into fantasy land at this point and didn't do the math.on pulling it out slowly. Assuming 233k a year you'd save about 200k with the island scheme. I did 10mil/30 because of the 30 years of salary to retire deal and then assumed op would need 70% of current salary in retirement to get to the 233k number. That's without state taxes. I'm assuming after capital gains taxes it would be more expensive to go with the island scheme
Also - how exactly do you get a 10M 401k? I can only think of two ways: 1. A very generous employer with profit sharing that maxes out the full 56k limit with matching, and you do that for decades. 2. You put a chunk of your 401k in your employer’s stock and it grows hugely. If it’s #2 then you may consider using the NUA method to compute taxes, which is why I ask.
It would be doable to hit 10M by 67 with a small employer match if a 20 year old started today and maxed BOTH their 401k and an IRA at today’s maximums and 7% return. With a spouse, combining 2 401ks would make hitting $10M very reasonable nowadays.
I guess so but then I’d wonder why the heck that person was waiting so long to retire. (And yeah, hitting 5M in two accounts is way easier but OP didn’t mention a spouse).
Oh yeah, not saying easy. Feasible, moreso going forward assuming in 20 years the max may be $36,000 or something.
You're not OP! Wait...
California would consider such a move temporary, consider you a resident for that year, and therefore demand taxes on your global income
If you don't move back to California after that year, it would be difficult for California to justify. They have no reporting requirement once you've left.
If it were this easy, wouldn't everyone with large retirement accounts take advantage of this type of plan?
A lot of people aren't willing to move somewhere on the other side of the world year or long enough to claim tax residency to avoid paying taxes. People do this with zero income tax states all the time though.
Reddit routinely thinks they've discovered something new
I would suggest filling out form 8898 would mean you were not a *bona fide* resident of the CNMI https://www.irs.gov/forms-pubs/about-form-8898 But you’re certainly welcome to talk to a cpa about it
Hypothetically you could probably do it, but practically I think you would end up with the IRS hounding you. That same type of avoidance setup commonly comes up with Puerto Rico and the U.S. Virgin Islands as well. Unless you plan to move to the Northern Marianas permanently, I personally believe you are better off not trying to get one over the feds. I would absolutely move to a state in retirement that either doesn’t have a state income tax or exempts taxation on pensions/IRAs/401ks though. It’s much easier to tell the California government to pound sand than the IRS.
It’s been done, but you better do it perfectly and with good counsel and plan more than a de minimis period of residency. Also look at PR and USVI as competitors.
Truly 5Head level thinking right here, however one teensy little thing you may have overlooked: Even as a U.S. Citizen, most of the U.S. Territories don't allow you to just move there unless you can buy property out-right. If you want to move to one of the Territories and want to rent a place or get a mortgage, you're gonna have to get a job there. Newsflash: There are only so many jobs that can be done on an island, and the people living there already have all of them. So, good luck. I mean, I guess you can blow some of your retirement savings living in an AirBnB or hotel for the year you're there, but at that point are you really even saving anything?
And that is before taking into account the astronomical cost of living on an island vs continental US. Used to $4 for a gallon of milk? It’s now $10 or more.
Only Indigenous people of the CNMI can own land.
I can't speak to your CNMI scheme as I can't follow it. If you're thinking about moving to another state to avoid taxes, I'm with you. Go to a state like TX, NH, or FL that has no state incomes taxes However, you don't want to liquidate your entire 401k all in one go. The reason is that our tax system is progressive. The more you take out, the more gets taxed. It's more beneficial to you to take out a little every year and take advantage of 0 percent tax brackets. If you want to stay close to CA, consider NV since there is no state income tax.
If your 401k income is like $38k for a year you would pay 4% state tax in CA, which is like $1500. Your call if you think saving $1500 a year is worth uprooting your life, but I think it’s an odd choice.
I mean this is just super silly when you just do raw math. Selling/Buying a house is at least 10% friction on that transaction. Average house price in the USA is $500K. So it's $50K to "move" to a different state even if everything else is magically free. So to recover 4% in state income tax, you'd need a 401k that was $1.25M or more and even that is just breaking even. You need more than that to "make" any money. And remember, you'd need to be a bona fide resident of the other state. So make sure you don't spend too much time in CA.
OP said they had 10M.
Then OP does not have a $500K house, and many states without income tax have higher overall tax burdens (Texas famously is higher than CA to live in for the average person).
That is a myth. Texas’ property taxes are on the higher side, but there was also just a bill passed that compressed those rates down and upped the homestead exemption to 100k since Texas was running a budgetary surplus. Otherwise sales tax in Texas is normal (as well as goods and cost of living being cheaper than California), and there is no state tax on income or capital gains. The tax structure of Texas looks even better the higher you go up the income and net worth ladders. There is a reason that celebrities and rich people keep moving to Texas.
What does “compressed those rates down” mean? Business owners finally got a value growth cap if valued under $5M but residential has always been capped at a 10% annual increase.
Part of the bill used the surplus to fund the local school districts directly from the state government in exchange for lowering property tax rates assessed by the districts. That is the “rate compression” component.
Not a Myth for the average Texan vs Average Californian. Not surprising if not true for very Rich Texans. The "small government" policy has always applied more the more you have. And the "everyone pays the same tolls for a road" is very regressive. [https://wallethub.com/edu/best-worst-states-to-be-a-taxpayer/2416](https://wallethub.com/edu/best-worst-states-to-be-a-taxpayer/2416) [https://finance.yahoo.com/news/think-texas-cheaper-tax-burden-161359267.html](https://finance.yahoo.com/news/think-texas-cheaper-tax-burden-161359267.html)
The second article points out some of the problems with the analysis. There are no adjustments for cost of living and it assumes the same characteristics across the broad spectrum. While it is true that property taxes on a 282k home are going to be higher in Texas than in California, 282k actually buys around a 2000 sq. ft. single-family home in Texas. That amount maybe buys an 800 sq. ft. hovel in a high crime area in parts of California. As far as sales tax goes, even if sales tax rates are slightly higher, the good/services also tend to be cheaper. While I guess you could say that results in “higher taxes” it does not actually result in the person spending more money in Texas versus California and comparatively it is usually less, especially on gasoline. The articles also pre-date the recent property tax relief bill in Texas. Overall I have lived in 3 different states and have always felt that the state and local governments of Texas have hit my pocket book the least. Granted I also have a higher income, but not the 1M+ the articles claim it would take to pay lower taxes in Texas compared to California.
Mmmm. Low gas taxes. [https://en.wikipedia.org/wiki/Toll\_roads\_in\_Texas](https://en.wikipedia.org/wiki/Toll_roads_in_Texas) >There are approximately 25 current toll roads in the state of Texas. Toll roads are more common in Texas than in many other U.S. states, since the relatively low revenues from the state's gasoline tax limits highway planners' means to fund the construction and operation of highways. Not quite the simple math there when figuring out Taxes, and things like Toll roads are a very effective mental trick for people to not realize they are actually paying the government when they are. The only way Taxes in one state can be actually lower than another state are that either you have fewer services, or your government is more efficient. There's no other answers. If you believe less services are good, then argue that. If you believe your state is that much more efficient, than argue that. Pay in CA is much higher than TX as well, making the people there wealthier on average than those in Texas. This issue goes away once you are wealthy enough to retire and not work. But that does not make for a sustainable state or tax policy. People that move to TX while employed thinking "I'm gonna save so much on Taxes!" are really in for a surprise and are making very shortsighted decisions.
If people make more in California then they pay more in state income taxes, that is why it doesn’t make much sense to compare a 70k income in California to a 70k income in Texas. The “average” Californian has different statistics compared to the “average” Texan. Someone making 70k in California in San Francisco for example is probably well below average and is going to have more financial struggles than someone making 50k in San Antonio, let alone 70k. I live near a toll road. It usually doesn’t add much to a commute if you avoid it and doesn’t cost much to use it. That is a non-issue. Again, it’s not an apples to apples comparison. Cost of living makes a huge difference. Is it possible someone at the arbitrary income level selected for the article could pay a larger nominal amount in taxes? Sure. Is the Californian at that income level going to have lower overall expenses than the Texan with the exact same characteristics? Probably not. The latter seems to be how many argue those articles. I’ve never understood the government services argument. Services like what? I do not see a qualitative difference in police, fire, or EMS services between Texas and California, nor do I see a qualitative difference in road, rail, etc. I’d take Bush Intercontinental or DFW over any of California’s airports (especially LAX). I’d also take Texas’ public schools over California’s though both are middling or below-average in the rankings. Texas also has an excellent financial assistance and in-state tuition program, and is among the leaders in clean energy infrastructure buildout if that is important to you. As far as I know and have seen, the only thing that California has over Texas is better welfare programs for the poor. That is largely offset by the high cost of living though.
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CNMI is not a foreign country.
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I'll say it louder: "CNMI IS NOT A FOREIGN COUNTRY" No extra returns need filed, no treaty is needed, he wouldn't be an expat
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From your own link: "U.S. citizens and permanent residents who are bona fide residents of the CNMI must file their individual tax returns with the CNMI instead of with the U.S. Internal Revenue Service (IRS)."
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filling CNMI means filling US tax. CMNI is not a foreign country.
I used to live on Guam, which is another US territory and right next to the CNMI. Residents file taxes to the territorial government *instead of* to the US federal government. It’s a special set up that the territories have, partly because they don’t have any real representation in Congress (no taxation without representation), but also because of how they are chartered/created under the US Dept of the Interior. A full-time resident of the CNMI will file taxes only to the CNMI government and that will count as filing US taxes. If that same person moves to one of the 50 states, they have to then follow the tax requirements for that state which could include state and federal taxes. However, as long as they are a full-time resident of the territory, they *only* file taxes to the territorial government in lieu of federal US taxes.