New York’s high tax rates could be at the root of a new phenomenon that worries financial experts: the massive flight of the wealthiest elite to other states in the country, a trend that could significantly affect the city’s tax revenue.
Data released by the New York City Independent Budget Office public agency indicates that the number of residents earning between $150,000 and $750,000 decreased by nearly 6 percent between 2019 and 2020.
The figure is even higher, 10%, when we’re talking about the number of people with incomes over $750,000. These people include billionaires such as entrepreneurs and investors Charles Icahnwith a fortune valued at US$17.6 billion, according to Forbes magazine’s real-time ranking.
Icahn, 86, was born in New York and has run his business from the city for decades. Now the office of his holding company Icahn Enterprises has moved permanently to Sunny Isles Beach, Florida.
To understand the impact of the migration trend of the wealthy, the 41,000 taxpayers who make up the city’s top 1% pay more than 40% of all income taxes, while the 450,000 filers in the top 10% pay about two-thirds of the total.
The web MoneyWise summarized in other words: the remaining 90% of taxpayers currently contribute about a third of the Irpef revenue.
A report from financial technology firm SmartAsset spoke in 2020 about the inclination of the wealthy to migrate out of state. That year, New York experienced a net loss of nearly 20,000 high-income households, defined as households earning more than $200,000.
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As with Icahn Enterprises, the exodus means the wealthy take their companies with them. As reported Forbes in 2020 the trend was also notable in Los Angeles and San Francisco, both with high tax rates and few business-friendly policies.
In New York’s case, it was even before the pandemic, when Wall Street executives moved thousands of jobs to other states in an effort to cut costs.
Credit Suisse, Goldman Sachs, Morgan Stanley, Barclays, UBS, Citigroup, Alliance Bernstein and a variety of other financial institutions have established their centers and are most heavily staffed in Florida, North Carolina, Salt Lake City, Dallas, Nashville and others less Expensive compared to NYC.
Where do New York’s wealthy flee?
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Florida It is the main state welcoming this wave of New Yorkers with very high purchasing power. According to SmartAsset, Florida added 32,019 taxpayers who reported at least $200,000 in income in 2020, up from just 11,756 it lost previously.
And it’s not the weather that’s the main reason the Sunshine State is a favorite destination for higher incomes: Florida is one of the few states in the country that doesn’t charge state income taxes on its residents.
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another southern state, Texas, leads the list, precisely because it doesn’t even have state income tax and has a more reasonable cost of living. In 2020, 18,417 taxpayers who earned at least $200,000 moved to Texas, a net gain of 5,356 high-income families, compared to the taxpayers they lost.
The value of a home in Texas hovers around $315,831, according to Zillow’s Real Estate Market, which is lower than the national average of $357,589. New York City, on the other hand, has a typical home value of $782,640.
Texas is also the state with the fastest annual job growth rate, at 5.4% from October 2021 to October 2022.
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Arizonarelatively close to Los Angeles, it’s the third-largest destination for the wealthy, with 5,268 taxpayers with incomes of at least $200,000.
This state has a state income tax, but has a flat rate of 2.5% for the 2023 tax year, the lowest flat tax in the country.
