A new report suggests that the highly publicized flight of wealthy New Yorkers to other states at the height of the pandemic was a short-term phenomenon and likely not caused by the state's high income taxes. ing. In fact, New York is now home to 15,000 more billionaires than at the beginning of 2020.
The report, released by the left-leaning Fiscal Policy Institute and based on census data and state tax information, comes amid a heated debate over tax rates and where the wealthy live. COVID-19 has disrupted local economies, leaving people with large salaries and investment income to work remotely and potentially pay less income taxes while doing so. These debates have intensified since it became more realistic.
The issue has become the center of policy debate in Albany, as well as in many other state capitals, after several billionaires, including Carl Icahn and Josh Harris, left New York for Florida. There is. Last spring, New York Democratic lawmakers pushed to raise taxes on high-income earners, but Gov. Cathy Hochul, also a Democrat, insisted on keeping taxes at current levels.
Nathan Gusdorf, executive director of the Fiscal Policy Institute, said the group's analysis could help lawmakers understand how budget decisions affect the state's finances and future negotiations on everyday New Yorkers. Stated.
He noted that even though the state's budget situation is improving, many leaders want tax increases “off the table” in the next legislative session. But new revenue is needed for policies that support middle-class New Yorkers, such as expanding child care and preschool, strengthening higher education, building more affordable housing, and expanding tenant protections. “We hope this report shows that states do indeed have the space to move forward with these important policies,” he said.
The report, titled “Who's Leaving New York State,” found that the exodus of wealthy New Yorkers caused by the pandemic in 2020 and 2021 has largely subsided in 2022. Those who left New York state during this period often took advantage of telecommuting. This program was more commonly available to higher-income workers.
“Contrary to long-term social trends in the state, people were actually trying to escape the pandemic,” Gusdorf said.
Additionally, the number of billionaires living in New York has increased since the pandemic, the report found. The state has lost 2,400 people since 2020, a more than seven-digit decline, but it has also grown by 17,500 people at the same time. A strong economy, rising wages and higher capital gains contributed to this increase.
The report said there was also a net benefit to the national exchequer as the income tax base expanded in both 2020 and 2021.
Tax burdens on high earners in New York state have been high for decades, but report finds that the top 1% of earners typically move out of state less frequently than other income groups did. Only 2 in 1,000 top earners left New York in the non-pandemic year. That proportion represents a quarter of the remaining population.
The institute's economist Emily Eisner and senior policy analyst Andrew Perry argue in the report that there is other evidence to suggest that the ultra-wealthy are not acting on tax rates. did.
First, the high-income earners who did leave the state usually did so for other high-tax states. Three out of four people who left went to either New Jersey, Connecticut or California. (Florida was a more popular destination for middle-class New Yorkers than billionaires, despite the highly publicized moves of prominent billionaires.)
Second, high-income residents did not leave the state at significantly higher levels, even after two recent changes that led to higher tax burdens. The first was in 2017, when President Donald Trump and Republicans in Congress approved a tax plan that would effectively raise state and local taxes for people in high-tax jurisdictions like New York. The second time was in 2021 when the state Legislature raised tax rates for people making more than $1 million a year.
“We found no behavioral responses indicating out-of-state migration among high-income individuals,” the authors write. “When high-income people do move, they are more likely to move to another high-tax state than to a low-tax state. This is because taxes are high on the list of motivations for high-income people to decide to move. This shows that it is relatively low.”
Gusdorf said he hopes the new study will counter the popular belief, especially among conservative media and experts, that higher taxes displace higher-income residents.
In New York state, for example, critics argue that the migration of high-income residents could worsen the state's budget problems and affect the state's overall population.
“New York state is letting go of the goose that laid the golden egg, its highest-paying taxpayer,” said John Ketchum, director of state and local policy at the Manhattan Institute, a conservative think tank. “As monthly tax collections fall short and fiscal realities bite into these spending promises, public leaders will be forced to confront (and revise) a harsh reality: New York is less livable. It's no longer an attractive place.”
Stephen Malanga, Senior Editor city journal Ketchum's colleagues at the Manhattan Institute argued that state tax policies often indicate what policymakers value.
“Taxes are an essential part of state migration, but they are not always done in a simple way,” he writes. “Taxes do not exist in a vacuum. They are a component of a governing philosophy. states that tend to have different spending priorities than, for example, more regulated, lower-tax states.
Meanwhile, Michael Mazerov, a senior fellow at the left-wing Center on Budget and Policy Priorities, wrote in August that many of the immigration patterns that conservatives attribute to tax rates are actually just a continuation of decades of policies. People moving from the Northeast and Midwest to Sunbelt and Western states.
“Policymakers in states like California, Connecticut, Illinois, Massachusetts, Minnesota, and New York should ignore warnings from anti-government advocates that state taxes are causing massive 'tax avoidance.' Conversely, lawmakers in states like Iowa, Mississippi, Nebraska, and West Virginia, which have recently cut income taxes, should have no illusions that such moves will halt, much less reverse, their states' long-standing trends in net population outflows. It's not,” he said. I have written.
Gusdorf acknowledged that partisan tensions over taxes and immigration will make it “hard to disprove the conventional wisdom, even if the conventional wisdom is wrong.” But he hopes the new report's data analysis will show that “this myth about billionaire tax migration is actually a myth.”
