Tax avoidance might make financial sense, but is it fair?

It's apparently not embarrassing any more to talk openly about tax avoidance.

This term shows up in news articles, investment websites and in invitations to drop by seminars hosted by financial firms.

An article from the personal-finance publication Money a few years ago was memorable for its photo of kids dressed like the chairman and vice chairman of a big bank, and it ran under the headline "6 Ways to Avoid Taxes Like a Millionaire."

Moving to Florida wasn't among them, so maybe that tax-avoidance idea is only top-of-mind here in Minnesota.

Tax avoidance, by the way, is looking for ways to minimize legal taxes and is not the same as tax evasion. Yet there's still something unseemly about avoiding taxes, so maybe it's one thing we do with our money where it's a question of degree.

Buying a Minnesota school district bond that's exempt from federal and state income tax could be considered a form of tax avoidance, but who could object to that?

At the other end of the spectrum is what Sir Jim Ratcliffe of the chemical firm Ineos Group has been up to. Described as the United Kingdom's wealthiest person, Ratcliffe along with two partners are reportedly on their way to relocating to the tiny Mediterranean city state of Monaco for an estimated tax savings of up to £4 billion.

No one can simply rent a house in Monaco and get out of £4 billion of taxes, and the news accounts were sketchy on how this plan would work. With the involvement of global accounting firm PricewaterhouseCoopers, though, it's fair to conclude that it's probably legal.

That doesn't make it right, of course.

Moving to Monaco is exactly the kind of tax-avoidance move that sparked some heat at the last get-together of the global swells in the Swiss Alps town of Davos. A young Dutch historian on a panel at the World Economic Forum in Davos decided he must call out what he saw as the elephant in the room, and that's the cost of tax avoidance.

The historian, Rutger Bregman, found all the earnest discussions of global problem-solving bewildering. There was no one saying out loud that governments do a lot of work on hard problems already and that the folks who flew in on a fleet of 1,500 private jets to talk about saving the world might want to start by giving up their efforts to get out of paying taxes.

"We can talk for a very long time about all these stupid philanthropy schemes …" he said. "We can invite Bono once more, but, come on, we've got to be talking about taxes. That's it."

Monaco can't be much of a destination for affluent Minnesotans, but Florida sure is. Moving there seems to fall somewhere between buying a tax-exempt bond and trying what Sir Jim and his buddies plan to do by moving to the Riviera.

I gained a lot more insight into why a lifelong Minnesotan would move to Florida by hearing from readers after a couple of columns this winter about taxes and retirement.

Florida doesn't have personal income taxes, but Minnesotans on their way to Florida point out that taxable income really can decline in retirement. The big issue is Minnesota estate taxes.

This is a tax on what someone owns when they die. There are federal taxes, but they don't kick in until the estate reaches the value of $11.4 million. The federal law has a feature called portability that allows a surviving spouse to use any part of the federal exemption that hadn't been used when the first spouse died. This means a lot more than $11.4 million can be exempt from the estate tax.

In Minnesota this year the exemption is $2.7 million, and next year it jumps to $3 million. Portability isn't allowed. As you maybe already guessed, Florida doesn't have an estate tax.

Only people with a net worth of more than $2.7 million have this worry, of course. The problem with the estate tax seems to arise in early retirement years, as a career has ended but before a retired couple has had a chance to spend down their money or give a lot away.

The Minnesota estate-tax rate starts at 13 percent, and retirees suggest they would feel terrible if a scary call from the doctor came and it looked like a big chunk of assets accumulated over a lifetime wouldn't get passed to their kids and grandkids. To head off that risk they move to Florida.

Moving to Florida must come up a lot in estate-planning meetings, and to have such a big difference from federal tax treatment is something our Legislature should work on. But nobody who talked to me about Florida also volunteered that they struggled with whether this kind of tax avoidance seems fair.

In thinking this through, it might be useful to know how the state of Florida manages to fund its state government if it doesn't have a lot of the taxes we have in Minnesota. The answer is basically a sales tax.

About 60 cents of every dollar of general-fund tax revenue in Florida comes from sales taxes, and another big chunk comes from the lottery.

One feature of sales taxes is that they cost lower-income people a bigger chunk of what they take in than is the case for more affluent people.

In Minnesota the bottom 20 percent of taxpayers by family income only pay about 8.7 percent of their income in state and local taxes. In Florida the poorest 20 percent of taxpayers pay close to 13 percent of their income in state and local taxes.

The top 1 percent in Florida pay only about 2.3 percent, according to the nonpartisan Institute on Taxation and Economic Policy.

As it turns out, low-tax Florida is not much of a low-tax state if you are not well-off. And before making the move there, you have to ask yourself this: Does that seem fair?