States Target Folks Fleeing Due to Tax Rates

Don't like our system? Here, have an audit.

With professional golfers and hedge fund managers talking about moving to lower-tax enclaves, states are stepping up audits on top earners who flee.

Several states including California and Maryland raised taxes on high earners last year, and Congress boosted federal levies on them. Families who look to change their domicile to a state with no income taxes such as Florida or Nevada open themselves up to years of scrutiny and possible litigation as local governments search for revenue.

"I look at some of these domicile audits almost as an archeological dig and a full physical including MRIs and CAT scans," said David Scott Sloan, a partner who advises high net worth families at Boston-based Holland & Knight LLP. "What we're seeing at least in Massachusetts is the tax authorities are not going quietly into the night."