Bay Area, CA: Convert a Property from +ve to -ve Cash Flow?

[V B.]

All,

I have a SFH rental in Bay Area, CA. I have around 1.2 mil equity in the property and around ~460K loan. The house is cash flow +ve. Around 12K/year. I have high W-2 income (50% tax), and am thinking about doing a cash-out refi for about +500K and use that cash to reinvest/work-harder and bring the cash-flow to 0 or slightly -ve. This avoids paying tax of ~6K on the income. I can use the use the cash to either invest in tax free muni- bond index funds or other less risky investments. The property is in a highly sought after neighborhood in Santa Clara county with good schools and the property has historically appreciated at much higher rate than inflation. Did anyone consider something like this in the past? With rates being so-low it makes sense to borrow at historically low interest rates and making that money work harder and lowering my taxes. No point paying taxes when I am already at a higher tax bracket. Instead, it makes sense to bring down the tax to zero by using the home-equity built up.

Please let me know, if this thinking is flawed. Will appreciate any insights.