How Vivek Ramaswamy's Well-Timed Ohio Move Likely Saved Him $12 Million In Taxes

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1:13The Republican candidate for governor has made the proposal his opening salvo in a larger tax-cutting agenda. That's to eliminate Ohio taxes on capital gains beginning next year. then phase out the state income tax altogether over the next decade. Last year, he said, quote, If we do it, founders will flock to Ohio in droves. Ramaswamy would know. His own move from New York to the state of Ohio in late 2019 came just before one of the largest windfalls of his career, likely saving him millions of dollars in state and municipal taxes. This according to CPAs, tax lawyers, and tax professionals who reviewed publicly available information about the matter.

1:58In December 2019, while Ramaswamy's biotech company Roy Vant Sciences was preparing to close on a previously announced$3 billion deal, Ramaswamy put his Manhattan condo up for sale. He then purchased a newly built home in Ohio's Westchester Township outside Cincinnati for$420 ,000. He moved to the new home and registered to vote in Ohio from the new address. The Roy Vant deal with Japanese drugmaker Sumitomo closed on December 27, 2019. Connected to that transaction, his board authorized a$1 billion share buyback that commenced in February 2020. For that year, Ramaswamy reported$176.7 million in total income, nearly three times as much money as he'd made in his entire career up to that point, according to his disclosed federal tax filings.

2:54The vast majority of Ramaswamy's 2020 income, that's$174.5 million, was a capital gain. And it apparently came from the transaction-related stock buyback. Ramaswamy reported$31.6 million in federal tax that year. Had he stayed in New York, his 2020 income, including the$174.5 million capital gain, would have generated an estimated$14.4 million in New York state tax, at the state's top 8.82 % rate that year. He also would have owed an estimated$6.3 million in New York City tax, at the municipality's top 3.876 % rate. That's about$20.8 million combined. The New York estimates assume all of Ramaswamy's federal itemized deductions were for qualifying charitable donations and apply the state's high-income deduction limit.

3:51The estimates exclude unknown state-specific adjustments in credits. And Forbes has not reviewed Ramaswamy's state tax returns. So instead of the$20.8 million he would have potentially owed in New York, By moving to Ohio when he did, Ramaswamy likely owed no New York State or New York City income tax on the$174.5 million. New York generally treats investment stock as intangible property and does not tax a non-resident's gains from the sale of such property as New York's source income, unlike wages earned from New York work or gains from New York real estate. Assuming Ramaswamy qualified as a full-year Ohio resident, his estimated total Ohio state income tax liability for 2020 would have been approximately$8.5 million before credits, plus roughly$30 ,300 in New York state tax, assuming he was a non-resident and all his wages were taxable there.

4:50Westchester Township levies no resident income or payroll tax, producing an estimated state and local tax savings of about$12.3 million compared with full-year New York City residency. Connie Luck, a spokesperson for Ramaswamy, said in a written statement, Like many young people, Vivek chose to move back to his home state to be near his parents and community ahead of having kids and raising a family. Those who sensibly leave New York for tax reasons flee to zero-tax states like Florida, not to a state like Ohio with a high state income tax of nearly 5 % in 2020. Brian Gordon, a CPA who worked as a New York State tax auditor for over 30 years and now advises clients through his private practice, says, quote, I think it's pretty cut and dry, actually.

5:42He changed his domicile to Ohio. The transaction took place after that, and it's an intangible asset, and that's it. He adds that Ramaswamy, quote, seems to have done a pretty good job. Indeed, there is nothing unlawful about swapping states before a big windfall and pending tax liability. It is common practice among those who are wealthy and tax savvy. Timothy Fogarty, a professor of tax and accounting at Case Western Reserve University, says, quote, people are always doing things like this. It's completely allowed. For full coverage, check out John Hyatt's piece on Forbes.com. This is Kieran Meadows from Forbes.

6:26Thanks for tuning in.

6:42Vivek Ramaswamy: Progressive's Accident Response can contact emergency services if you're in a major accident. The only thing worse than someone you love being in an accident is not being able to help them. So Progressive is here to help when you can't. So get peace of mind knowing your loved ones are protected with Progressive's accident response. Learn more at Progressive.com. Progressive Casualty Insurance Company and Affiliates. Limited availability in California. Driver is responsible for emergency and towing charges not covered by the policy. Coverage subject to policy terms and conditions.