New York progressives have long pointed to the state’s growing number of millionaires as proof that their “tax the rich” agenda has worked. But a Washington Examiner analysis of the Citizens Budget Commission’s annual estimates found that New York lost an estimated $51.5 billion in personal income-tax revenue between 2011 and 2022 because its share of the nation’s millionaires fell below its 2010 level.
Over 33,000 residents with incomes above $1 million lived in New York in 2010. Twelve years later, the number jumped to over 67,000. Progressives often cited the growing millionaire population when New York City Mayor Zohran Mamdani floated a 2% tax on millionaire income to expand the city’s safety net.
But during the same period, millionaires tripled in California and Texas, and quadrupled in Florida. Meanwhile, the Manhattan Institute’s E. J. McMahon found the Empire State’s share of all income millionaires declined from 12.7% in 2010 to 8.7% in 2022. A recent Citizens Budget Commission counterfactual estimated that New York would have collected roughly $10.7 billion more in personal income tax collections in 2022 had it maintained its 2010 share of millionaires.
“The profile of New York’s highest earners is a warning about both the volatility and portability of the income coming from the top,” Manhattan Institute fellow Ken Girardin told the Washington Examiner.
New York’s left wing imagines wealth as a fixed pie of which “greedy” oligarchs consume more, to the detriment of others. Since the number of wealthy New Yorkers doubled, they argue wealth redistribution must go further. But as renowned economist Thomas Sowell has pointed out in Basic Economics, “many economic fallacies are due to conceiving of economic activity as a zero-sum contest … ignoring the fact that wealth is created.”
As America created more wealth, New York captured a smaller share. Most indicative of the state’s bottom ranking in tax competitiveness is the decline in its share of adjusted gross income among millionaire earners, from 14.6% in 2010 to 9.86% in 2022. Among New York taxpayers earning more than $10 million, capital gains account for a plurality. The hallmark of American wealth generation is “capital gain” — from equity and stock in growing businesses to selling innovative companies.
Top earners derive much of their income from capital gains and other investments — the rewards and losses that come with taking risks. Among New York taxpayers earning more than $10 million, 83% of income comes from non-wage sources. Yet New York’s share of these ultra-high-income taxpayers has fallen 31% relative to the national total. Progressives may celebrate an increase in the number of millionaires, but the state is losing the people most responsible for generating and accumulating wealth.
“People have a lot of discretion over where and when they realize capital gains,” Girardin told the Washington Examiner. “There’s a serious risk that people will time their realizations around moves to lower-tax locales. That’s revenue that New York otherwise would be collecting.”
Taxpayers earning at least $1 million in California, New York, Texas, and Florida accounted for roughly half of all realized capital gains nationwide. In 2010, New York generated 14% of the nation’s realized capital gains, ranking second. By 2022, its share had fallen to 8.9%, dropping the state to fourth place. Florida moved in the opposite direction, rising from fourth after the Great Recession to first, with 16.7% of the national total.
Girardin says, “It’s the McMahon factor — a state’s share of millionaire earners is one of the most important metrics of a state’s economic health.”
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But New York does not smell the smoke. Instead, state legislators have floated punishing wealth creation itself with a tax on billionaires’ assets, which could include equity in start-ups, stocks in public companies, and the value of innovation.
The Empire State may still have more millionaires than it did a decade ago, but it is capturing a smaller share of the wealth created in America. Taxing that shrinking share more aggressively will only weaken the state’s finances at a time when its leaders are promising to spend more than ever.
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[ H/T Washington Examiner ]
