Tax migration—is it a thing in New York? A new report suggests maybe not.
The term “tax migration” tends to trend when wealth taxes are discussed. The math seems easy. If taxes on the uber-wealthy are strengthened, those individuals, families, and corporations will migrate to states or regions of the world with lower and more hospitable tax rates.
As we discussed earlier, high-asset individuals and entities are more mobile and can oftentimes afford to pick up and go when a state tax situation is formidable. In 2023, an analysis of information from the Internal Revenue Service (IRS) showed that California and New York lost residents. At the same time, the data revealed Florida and Texas gained in population. Neither Florida nor Texas has a state income tax. A new report from the Fiscal Policy Institute (FPI), suggests there may be more to the numbers—at least in terms of New York state.
During the pandemic, the wealthiest New Yorkers fled the state, but not necessarily for lower tax jurisdictions. The FPI report used recent state tax data and census figures to create a more nuanced picture of those who are currently leaving (or returning) to New York. In the report, the term “high earners” refers to the top one percent or those who earn greater than $815,000 annually. Findings of the report include:
- When they do leave the state, affluent New Yorkers are likely to move to another state with similarly high tax rates.
- Tax increases in the state of New York in 2017 and 2021 did not appear to cause top earners to leave the state. Overall, wealthy individuals move out of the state at one-quarter of the rate of those who earn less. The report notes that New York has traditionally taken in fewer residents than the number of residents leaving.
- High earners left New York during COVID primarily to escape the pandemic and because they were able to work remotely. The state again returned to pre-COVID migration rates by high-wage earners beginning in 2022.
- Between 2020 and 2022, New York millionaire households declined by 2,400. At the same time, there was a gain of 17,500 millionaire households in New York. The increase was associated with a strengthening economy and higher wages.
The upshot is that New York remains a popular state of residence for those with high assets. As noted by study authors, “not only is high earner tax migration largely a myth, but there is no need to fear for the State’s fiscal and economic future.”
Speak with an experienced tax attorney if you face an IRS audit, tax litigation, or criminal tax allegation
If you have questions regarding tax compliance in New York or elsewhere in the country, speak with the legal team at Robert J. Fedor, Esq., LLC. Our team can respond to your domestic and international tax and regulatory questions. Call 800-579-0997 or contact us online today. We have offices in Cleveland and Chicago.
