Some rich New Yorkers are warning that Zohran Mamdani's vow to increase taxes on the richest 1% (an additional 2% on those earning over $1 million a year) will lead to many millionaires moving out of the area, and the hollowing out of the city's tax base. Pierre Poilievre also raised this same spectre when the Liberals planned to raise the capital gains tax inclusion percentage last year. It's practically an article of faith among Conservatives.
But is there any reason to believe that that would really happen?
History, apparently, says otherwise. When New York raised income taxes on millionaires in 2021, the number of millionaires in the state actually increased by 21%. When New Jersey increased taxes on high earners in 2004, 37 millionaires did indeed leave the state, but by the end of the year, some 3,000 new millionaires became New Jersey taxpayers. Ditto with California's tax hike in 2005: the state's millionaire population grew by 30% over the next two years.
In fact, it turns out that the highest concentrations of millionaires are found in high-tax states and cities. Furthermore, millionaires seem to be less mobile than other people: only 2.4% of millionaires move across state lines each year, compared to 2.9% of the general population. And when they do move, they tend to move from one high-tax city to another, rather than to some tax haven.
That's partly because high-tax cities and states are actually nicer, pleasanter, more livable places to reside in - cleaner, safer, more vibrant. There's also a lot of inertia to overcome - moving cities and starting over from scratch in a new job, new home, new school for the kids, etc. etc, is a lot of hassle and upset.
Like most political articles of faith, this one is also based on no real data, just wishful thinking and deliberate panic-striking.
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