The Empire Center, a nonpartisan think tank in New York, released a report today suggesting that New York has lagged behind the rest of the nation in making new millionaires. From 2011-2012, the United States on the whole saw a 29 percent increase in the number of millionaire tax filers. New York, however, saw only a 14.6 percent increase in the same period, the lowest rate of growth in the country.
The report further points out that New York had also “trailed the national rate of increase in the number of taxpayers earning AGI of $200,000 or more.” Authors E.J. McMahon and Daniel Russo argue that these are troubling indicators and point to weaknesses in the state’s economic growth and wealth creation. In fact, there is good reason to believe taxes may play a role in slowing the rate at which states gain new millionaires.
One deterrent for the state’s wealth creation is its “Millionaires Tax.” As we have written before, some states have been more willing to raise income taxes by designing the increase to affect only a small subset of high-income earners. The income level at which the new top rate applies is often a sharp jump from where the top rate previously applied. In the case of New York, rates jump from 6.85 percent to 8.82 percent on incomes over $1 million.
With New York having some of the most burdensome taxes in the country on individuals who may be most sensitive to taxes, it makes sense that growth in millionaires would be slower. Throughout the nation, more burdensome taxes are associated with slower formation of millionaires.
© 2014 Washington Examiner
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