What happened after New York raised taxes on the rich

The threats came in a steady stream last year from Fox News, hedge fund manager Bill Ackman, and Gristedes grocery chain CEO John Catsimatidis, who insisted that wealthy New York City residents were “panicking” at the possibility that then-state Rep. Zohran Mamdani, a democratic socialist, could become the mayor and ensure rich locals pay more in taxes to help fund crucial services.

“It only takes a handful of successful people to leave to decimate the city’s tax base,” cautioned Ackman, while Catsimatidis suggested many rich New Yorkers would likely join him in fleeing to “the promised land”: Florida, which has no state income tax.

But the progressive think tank Groundwork Collaborativesaid Thursday that new Internal Revenue Service (IRS) data should be “the final nail in the coffin” of the evidence-free, perennial claim that higher taxes cause wealthy residents to leave their cities and states.

The agency released its 2023 Statistics of Income (SOI) data, covering the period before Mamdani became mayor and introduced a tax on second homes, ranging from 0.8% to 1.3% for properties valued at $5 million or more, which he estimated will raise $500 million annually.

The data shows how the tax base was impacted after the state imposed a separate tax policy in 2022, raising its top tax rate on the highest earners.

Poking a giant hole in the persistent theory that wealthy people won’t want to live in states that require more from them in taxes, the number of New Yorkers reporting more than $1 million in income grew by about 3% after the tax rate was raised, the SOI data shows.

“If there was any merit to the myth that tax increases on New York’s wealthy drive them away, the new IRS data should show it. It doesn’t.”

The number of millionaires nationwide went down in 2023, but New York counted 2,000 more than it had the previous year. The number of tax filers earning between $500,000 and $1 million also grew by over 8,500—more than 7%.

The average adjusted gross income of New Yorkers who left the state from 2022-23 fell 15%, from over $125,000 to $106,900.

“If the past is prologue, the SOI data suggest few, if any, of the city’s wealthiest residents will leave as a result of a modest tax. Instead they are likely to remain rooted in the social, business, and economic networks that make New York uniquely valuable to them,” said Groundwork Collaborative. “The New Yorkers actually at risk of leaving the city are the lower-income workers who power the economy.”

Lindsay Owens, president and CEO of Groundwork Collaborative, said the new data makes clear that “tax flight is nothing more than a myth, and should be given as much credence as flat-earthers.”

“If there was any merit to the myth that tax increases on New York’s wealthy drive them away, the new IRS data should show it,” said Owens. “It doesn’t—New York’s millionaire population kept climbing years after the state raised taxes on top earners.”

Wealthy New Yorkers, said Groundwork, are shown by the data to be “a settled population that may squawk about a tax increase, but not pack up and leave.”