New York’s high tax rates could be behind 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 income tax revenue of the city.
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 fell nearly 6% between 2019 and 2020.
The figure is even higher, 10%, when we talk about the number of people with incomes above US$750,000. Those people include billionaires like entrepreneur and investor Carl Icahnwith a fortune valued at US$ 17.6 billion, according to the real-time ranking of Forbes magazine.
Icahn, 86, was born in New York and had 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 wealthy migration trend, the 41,000 taxpayers who make up the top 1% of the city pay more than 40% of all income taxes, while the 450,000 filers in the top 10% pay about two thirds of the whole.
The web MoneyWise sums it up in other words: the remaining 90% of taxpayers currently contribute about a third of income tax revenue.
A report from the financial technology company SmartAsset spoke in 2020 about the inclination of the wealthy to migrate out of state. That year, New York saw 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 that the rich take their companies with them. As he 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 the case of New York, 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 have larger staffs in Florida, North Carolina, Salt Lake City, Dallas, Nashville, and other less Expensive compared to New York.
Where do the rich in New York flee?
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Florida It is the main state that welcomes 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 had previously lost.
And it’s not the weather that’s the main reason the Sunshine State is a favorite destination for high income earners: Florida is one of the few states in the country that doesn’t charge state income taxes to its residents.
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another southern state, Texas, leads the list, precisely because it also has no 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 households, when compared to the taxpayers it lost.
The value of a home in Texas hovers around $315,831, according to the Zillow 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, ranks as the number three destination for the wealthy, netting 5,268 taxpayers with at least $200,000 in income.
This state does have a state income tax, but plans a flat tax rate of 2.5% percent for tax year 2023, the lowest flat tax in the country.
