Emboldened by June\u2019s primary election results, New York\u2019s spendthrift progressives are preparing the ground for another increase in what are already the nation\u2019s highest personal income-tax rates. Their latest push reveals the extremes to which they\u2019re prepared to stretch data\u2014or ignore data altogether.<\/p>\n
Earlier this summer, several New York State lawmakers saw their bids for renomination thwarted by challengers running to their left<\/a> on a promise to \u201ctax the rich.\u201d This even as many of those members, and their Democratic conferences, had pushed to hike taxes on incomes over $5 million<\/a> in this spring\u2019s budget talks. The stage is set next year for another round of bruising budget negotiations, as Albany Democrats, watching their left flank, will likely try again to press Governor Kathy Hochul to boost the state\u2019s top tax rates.<\/p>\n Finally, a reason to check your email.<\/p>\n Sign up for our free newsletter today.<\/p>\n Sensing an opportunity, the labor-aligned Fiscal Policy Institute (FPI) last month launched a review<\/a> of the latest federal tax data. Its report intends to rebut claims that high earners are in the midst of a mass exodus to lower-tax locales. In doing so, it hopes to encourage state lawmakers to hike taxes further.<\/p>\n Its analysis, the FPI contends, shows that \u201cstates with progressive tax systems are the most millionaire friendly.\u201d The implication is that Albany can raise rates without scaring off more millionaires. But both of these assertions crumble under inspection for correlation, let alone causation.<\/p>\n The report authors, the FPI\u2019s Andrew Perry and Cornell professor Cristobal Young, designated five states (Connecticut, Massachusetts, New Jersey, New York, and California) plus Washington, D.C., as having the nation\u2019s \u201cmost progressive\u201d income tax systems.<\/p>\n That categorization is questionable. Connecticut\u2019s top rate, kicking in at $500,000 for individuals and $1 million for couples, is 6.99 percent. Six states that FPI omitted had higher rates<\/a> in 2023, ranging from Wisconsin\u2019s 7.65 percent to Hawaii\u2019s top rate of 11 percent. A Minnesota couple making $250,000 a year would have paid a higher marginal rate under its supposedly less progressive tax regime than even the highest-earning households in Greenwich, Connecticut. But Connecticut had the highest concentration of millionaires (almost nine per 1,000 filers), so FPI had little choice but to include it.<\/p>\n The authors\u2019 definition of \u201cmillionaire friendly,\u201d meantime, conflates the existing concentration of millionaires in an area with the extent to which public policy affects that concentration. Here it\u2019s telling that FPI counted Massachusetts among its \u201cmost progressive\u201d cohort even though its \u201cmillionaire tax\u201d had only been online for a single year. The Bay State, in fact, had for decades imposed a flat income tax, but the authors wanted to slay a strawman.<\/p>\n Even looking at the one-year snapshot poses problems for the FPI\u2019s analysis: the concentration of millionaires in Florida, which doesn\u2019t levy an income tax, was higher than in California or New Jersey in 2023.<\/p>\n Looking at this dynamic over time, as the authors do, directly undercuts their own claim, because it shows New York losing ground compared to Florida in terms of millionaire concentration. Between 2010 and 2023, the concentration of income millionaires in New York almost doubled, from 3.86 per 1,000 to 7.32. In Florida it more than tripled, from 2.02 to 6.5.<\/p>\n The national picture is even more troubling for New York. As my colleague E. J. McMahon has documented<\/a>, New York\u2019s share of the nation\u2019s income millionaires fell steadily in the last decade, from 12.7 percent in 2010 to about 9 percent in the four most recent years for which data are available (2020 to 2023). Put another way, for every New Yorker making $1 million in 2010, there were seven people in other states making as much. Today, it\u2019s more than ten. The decline in the McMahon measure should have Albany on high alert because it\u2019s an objective measurement of the state\u2019s overall economic competitiveness.<\/p>\n Three years ago, the FPI made headlines by pointing out that millionaires generally move between states at a lower rate than the rest of Americans. The FPI and its allies treated this as vindicating New York\u2019s 2021 tax increases<\/a>, which made the top combined state-local rate in New York City the nation\u2019s highest (almost 15 percent).<\/p>\n It shouldn\u2019t come as a surprise that high incomes are generally linked to working in a particular location or for a particular employer, or that the people earning them are less likely to move away from that source in a given year. But it should also be no surprise that New York-based industries and firms are choosing, with the tax climate prominent in their thinking, to expand in lower-tax locales. Just two weeks ago, for example, the New York Stock Exchange opened a new trading operation in Dallas<\/a>. This just as Texas surpasses New York in some measurements of finance-related employment, and as iconic firms such as JPMorgan Chase report having more employees in Texas than in New York<\/a>.<\/p>\n The Empire State\u2019s high earners aren\u2019t rushing to the exits, but their capital is creating more millionaires elsewhere in the country. Governor Hochul and state lawmakers should strive to understand why\u2014and to ensure their policies don\u2019t contribute to that trend.<\/p>\n