ALBANY – The number of earners in New York making $1 million or more fell slightly in 2016 as state leaders are growing increasingly concerned about the rich leaving for lower-tax states.
The 2.4 percent drop between 2015 and 2016, the latest years available, meant New York had about 1,100 fewer million-dollar earners than it did in 2015, down from 47,136 to 46,024.
While the state didn’t express alarm over the dip, the decline goes to a larger point that Gov. Andrew Cuomo has raised in recent months about wealthy New Yorkers potentially leaving because of federal laws that cap tax deductions and hurt high-tax states.
The fall in 2016 was seen most in the two counties with the most millionaires: Manhattan and Westchester.
Despite the latest figures, New York has had healthy increase in the number of wealthy taxpayers over the past decade, the records from the state Department of Taxation and Finance shows.
The number of million-dollar earners grew 26 percent between 2006 and 2016, the data reviewed by the USA TODAY Network New York found.
In some counties, it doubled over the decade, including in Saratoga and Brooklyn.
Leaving New York
Cuomo is attributing an unexpected $2.3 billion fall in state revenue this year to what he fears are some wealthy people moving to states with lower taxes.
If the rich leave, it hurts the state’s finances. The $1 million-or-more earners pay about 40 percent of the state’s income taxes, yet are less than 1 percent of the total tax filers.
“One percent pay nearly half of all those taxes,” Cuomo said Feb. 4. “Those one percent are the richest people in the state. They’re the richest people in the country, and they are the most mobile people in the country.”
Cuomo’s estimation has been met with skepticism.
Cuomo is putting the blame on part of the federal tax law that installed a $10,000 cap on the deduction of state and local taxes, including property taxes.
That cap particularly hurts wealthy New Yorkers.
Cuomo’s claims are likely overstating the immediate impact of the deduction cap, said E.J. McMahon, founder of the Empire Center, a fiscally conservative think tank in Albany.
It’s simply too soon to know if people have fled the state because of the so-called SALT cap, McMahon said.
The larger reason for the shortfall appears to be changes in when some millionaires made tax payments, as well as poor performance on Wall Street and an overestimation of revenue by the state, he said. New York City blamed its dip in recent revenue mainly on Wall Street.
“Did we lose $2.3 billion worth of taxpayers in two months? No. You would see other signs of that. The problem is he exaggerates the pace of the outflow,” McMahon said.
Drop in millionaires
Overall, New York is grappling with a population that is growing more slowly than other states, as well as the out-migration of 1 million people over the past decade.
But when its the wealthiest New Yorkers who pay the most taxes that leave, the hit is even more profound on the state’s finances.
The number of millionaire earners plummeted during the recession, fueling record state budget gaps, but jumped back up since 2009.
State officials said the 2016 figures recently released by the tax department may be an anomaly.
Capital gains were down that year, as were financial-sector bonuses. The economy improved in 2017, state officials said, and the next set of numbers could show a rebound.
“The number of taxpayers subject to the state’s highest tax rate tends to fluctuate with the fortunes of the economy and the financial markets in particular, which manifest in bonus and capital gains realizations,” said Morris Peters, spokesman for the state Budget Division.
The Budget Division said the 2018 figures, though, might dip because of the SALT cap, saying receipts are down because of lower withholdings and lower estimated tax payments.
The falling revenue, it said, started abruptly in December and has continued through this year, pointing to similar situations in other high-tax states, such as New Jersey, California and Connecticut.
Manhattan remained the county with the most million-dollar earners, about 21,000 in 2016, up 32 percent between 2006 and 2016, yet down 4 percent between 2015 and 2016.
Second was Westchester with 7,600 in 2016. That was a 10 percent increase over the past decade, but a drop of 4 percent between 2015 and 2016.
Between 2015 and 2016, the number in Monroe County fell from 662 to 541, an 18 percent decline. Yet the number of wealthy people in the county was still up 13 percent since 2006, the records show.
Million-dollar earners were up 79 percent in neighboring Ontario County over the decade: from 57 to 102.
But that still less than the increase in Saratoga, where the number rose 98 percent to 242 since 2006, and in Brooklyn, where it was up 102 percent to 2,860 by 2016.
While Cuomo has raised concerns about losing millionaires to other states, he and the state Legislature this year plan to keep higher income-tax rates on the wealthy set to expire at year’s end.
The proposal calls for extending the 8.82 percent rate through 2024. It was first installed in 2011 and brings in $4 billion a year for the state.
At the same time, though, Cuomo wants to continue small decreases in income-tax rates for the middle class.
McMahon said a concern for the state is fewer million-dollar earners who still pay taxes in New York because of business interests, for example, but live elsewhere, particularly among those earning $10 million or more.
New York can lose out on taxing some of their income, such on capital gains or dividend income, that can mean less revenue for the state, he said.
The super rich might take another hit in New York this year. The state is considering a pied-à-terre tax that would put a property-tax surcharge on nonresident owners of homes worth more than $5 million in New York City.
The money raised, estimated at about $650 million a year, would help fund the city’s transit system.
But some groups warned that too could drive more rich people from investing in New York.
“Lawmakers should seriously consider lower tax rates that will do less harm to the attractiveness of New York City,” said the Citizens Budget Commission, a business-backed think tank.
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