A tax hike on New York’s richest residents has fuelled fears of an exodus of millionaires that could imperil the city’s finances.
New state tax rates will mean the highest earners paying 52 per cent of their income to federal, state and city coffers. Some have said that they will leave for the lower tax codes of Florida or Texas — while fellow New Yorkers bid them good riddance.
In a city where the wealthiest five per cent contribute 60 per cent of the revenue and fewer than 2,000 of the very richest account for more than a sixth of tax revenues, the loss of many of them would have significant consequences.
“If we lose even a couple of thousand of these guys then tax receipts will shrink drastically,” Euan Rellie, 53, said. Rellie moved to New York 25 years ago to found an investment banking advisory firm.
“Part of the reason I came here is because it’s such a business-friendly place,” he said. “The analysis I’m reading says business people in New York may be paying more tax than in some European countries, which is not what we were advertised at all.”
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Politically liberal, he is generally supportive of President Biden's infrastructure plan and efforts to improve social welfare. He worries, however, that the tax hikes could have unintended consequences.
“Quite a few friends, mostly in finance, have moved to Florida already during the pandemic,” he said. “The question is whether some of them say: ‘Bugger it, I won’t go back.’”
Among the departed was Christopher Wheeler, 62, an investment banker and writer who moved out of the city to Westchester county in New York state. His wife had been wanting to move for years, he said. The pandemic and rising crime in the city had persuaded him.
As his part of midtown emptied out, people began drag racing down his street in the middle of the night. He said that there were also large groups of young men on motorbikes.
They still have a flat on Central Park but they don’t plan to renew the lease. He said that the move was about “being able to sleep at night, not having crazy people drag racing on 59th street”.
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His wife lamented the absence of ballet and a lack of security. Now the tax hikes would make an already expensive city even more so.
“What Governor Cuomo and the folks in Albany don’t understand is that like California, they are pricing themselves out of existence,” Wheeler said
Though the tax rise would place the wealthiest New Yorkers on the highest rates in the nation, legislatures in California, Minnesota and Washington State are also considering even higher tax increases as they look to restore public finances after the pandemic.
“Working and middle-class taxpayers will receive the relief they desperately need, while the wealthiest New Yorkers will help their neighbours,” Andrea Stewart-Cousins, 70, the majority leader in the state senate, said.
Those earning more than $1 million would see their state taxes rise from 8.82 per cent to 9.65 per cent. Those making more than $5 million would pay at 10.3 per cent and those earning at least $25 million would face 10.9 per cent.
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When combined with the city’s personal income tax of 3.9 per cent and the 37 per cent top rate of federal income tax, the top marginal personal tax rate for the wealthiest residents would be nearly 52 per cent.
Wednesday Martin, an observer of New York’s wealthy and author of the book Primates of Park Avenue, said that she knew of wealthy families that were leaving.
“I see them going to Dallas, Texas,” she said. “I see them going to Palm Beach, Florida. I see them going to Aspen. The very wealthy people have not entirely given up on New York but they want to have an escape valve.”
Martin said that many were socially conservative and “read the Black Lives Matter movement as a threat, rather than as a social justice issue”. She added: “They find the Biden and Harris leadership of the country also threatening.
“I would say without question there is an element of racism in the very wealthy escaping from New York city. I do think of it as an echo of white flight from New York that happened when people went to the suburbs in the 1970s because they wanted to escape what they thought of as an urban grittiness and the reality of a racially diverse city.”
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Census figures released late last year showed the state population had fallen by 126,355 people, more than any other in the country. Another study compiled by a tech company from mobile phone data showed the city losing about 70,000 people.
Rellie, an entrepreneur originally from Britain, said: “Historically, there have been studies that will say that relative tax rates do not make people move.”
He worried, however, that the pandemic might have changed the calculus, as more people worked from home.
Michelle Caruso-Cabrera, 52, a former broadcaster for CNBC who is standing to be New York city comptroller, supervising its purse strings, was also concerned about the effects of the tax rises. She added, however: “The only problem with moving to Florida is you have to live in Florida. I have lived in Florida and I assure you that I have chosen New York for a reason.
“The summers are atrocious, it’s a car culture with traffic as bad as New York city and no public transportation. The arts and culture of New York city are always the best in the country.”
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Jill Kargman, an actress and writer based on the Upper East Side, put it more bluntly: “If you make your money in New York city and reward it by flying to Florida then you have your reward.”
New York over the past year had grown more interesting, she said. “As the prices come down the artists can afford to stay and there is more risk/reward for real estate offerings, for chefs setting up new restaurants. People are getting incredible deals right now.
“I’m having a feeling I had in my childhood, not that it didn’t have its negatives then, when New York was bankrupt and there were a lot of homeless people.
“I’m not glamourising that. I didn’t think it was cool when the subway was totally covered in graffiti. But perhaps there will be room for exciting things to happen in the creative fields and the arts. We have to let the air out a little bit. Let those billionaires fly to Palm Beach.”
