Wealthy New Yorkers moving out of state during the pandemic worried lawmakers since the top 200 taxpayers contribute about 10% of total personal taxes in the state. However, a report released Tuesday by the Fiscal Policy Institute, a nonpartisan think tank, suggests the migration of New York’s affluent is significantly less than the number of working-class families leaving in droves.
“Most significantly, this report finds that in response to tax increases, there’s no significant behavioral change among that higher evaluation,” said Nathan Gusdorf, executive director of the Fiscal Policy Institute. “In other words, there’s no evidence there’s a specific behavioral response to tax increases.”
That same day, a report from the state comptroller finds the number of New Yorkers leaving the state quadrupled from 2019 to 2020 — amid the onset of the COVID-19 pandemic.
State Comptroller Tom DiNapoli said more than one of every 100 resident personal income tax filers left the state in 2020, driven by a departure from New York City. Personal income tax is New York’s largest revenue source, with $60 billion paid by nearly 11 million taxpayers in 2021. While the departure rate declined in 2021, the number of taxpayers leaving the state was still one-third greater than the pre-pandemic average.
The report also found that middle-class families have been leaving the state at the highest rates. In 2020, the rate was lower and then skyrocketed beyond pre-pandemic trends the next year.
Single filers accounted for over half the out-of-state migration in 2020, with 35,676 tax filers who made between $50,000-$100,000 leaving the state. These filers comprise the largest share of the state’s personal income tax.
“However, most of those who move out take their income with them: nearly two-thirds in 2021 retained no New York source of income after they left, suggesting a potential loss of economic activity,” DiNapoli said in a statement. “While the number of resident taxpayers grew slowly but steadily up until 2021, including at the highest income levels, attrition of resident taxpayers could be a cause for concern.”
According to the Fiscal Policy Institute, the idea that wealthy New Yorkers are leaving the state because of increased taxes or other policies is a myth.
Over the past three years, New York lost 2,400 millionaire households. However, the report finds that New York gained 17,500 of these wealthy households during that same period due to a “strong economy” and “rising wages.”
“In order to address New York’s recent population loss, we must first understand who is leaving — and what is pushing them out the door,” Gusdorf said. “Contrary to conventional wisdom, the richest do not leave the state more frequently than other New Yorkers; rather, they typically leave at one quarter the rate of the general population in normal, non-COVID years.”
Citing data from the U.S. Census, the institute’s report found that when higher earners do leave New York, the lion’s share of the top 1% move to other high-tax states including Connecticut, New Jersey and California.
The reports come ahead of Gov. Kathy Hochul’s budget proposal for the 2024 legislative session in Albany. She has until Jan. 16 to unveil her proposal for a state budget that is expected to exceed the $229 billion spending plan for the current fiscal year. However, Hochul has maintained that she’ll not be raising taxes — amid calls for higher taxation of the state’s most wealthy from fellow Democrats.
“I’m not raising taxes in our budget this year,” Hochul said to reporters last month in regards to getting New York City out of its budget’s $7 billion gap. “Taxes are high enough in the state of New York and we have to live within our means.”
Gusdorf cautions lawmakers from making cuts that impact working-class jobs and essential public services, including public safety, sanitation, libraries and public schools, that create the most burden for middle-class families.
“New York is not struggling to retain the most affluent — New York is losing working and middle-class families,” he said. “In the face of projected budget gaps, the city and state should avoid cuts to essential public services — which will only make life more costly for the working and middle-class New Yorkers who are already leaving the state at elevated rates."
