New York’s share of the nation’s income millionaire households continued to fall in 2019, capping a decade of sluggish growth in the high earners Albany depends on for an outsized chunk of state revenue.
In 2019, according to just-released data from the Internal Revenue Service (IRS), the number of New York tax filers with adjusted gross incomes above $1 million dropped to 55,100, from 57,210 in 2018. That 3.7 percent decrease came even as the number of millionaire filers nationally was growing to 554,340 from 541,410, an increase of 2.4 percent. Only five other states experienced a decrease in millionaire filers in 2019—and the only state to experience a bigger drop than New York was Oklahoma (down 5.1 percent), whose oil barons were clobbered by an industry-wide slump that year.
Including the latest numbers, New York’s share of the nation’s total millionaire earner population dropped to 9.9 percent, down from 12.7 percent as of 2010, the year after the state enacted a supposedly temporary and ultimately permanent higher rate on millionaire earners. As shown in the chart below, New York’s share of both tax filers and total incomes in the highest reported bracket was the lowest since the IRS began to consistently break out tax return numbers in the $1 million-and-above category on an annual basis starting in 2010. (The agency previously reported millionaire earners in its annual Statistics of Income reports from 1997 to 2001, when New York’s share ranged from 10.6 percent to 13.6 percent of the national total).
Between 2010 and 2019, the IRS data show, there was a 96 percent increase in the total number of federal income tax filers earning $1 million or more. In New York, however, the increase was just 54 percent. Only five states gained fewer income millionaires. By contrast, that top earner cohort grew faster in all of New York’s neighboring states except Connecticut (which was up only 36 percent).
The 50-state pattern is illustrated in the map below.
As noted here previously, New York’s competitiveness among high earners was hit hard by the cap on state and local tax (SALT) deductions, part of the Tax Cuts and Jobs Act, which took effect in 2018. Adjusting for federal deductibility, New York State’s personal income taxes on the highest earners were boosted further above all-time highs by the state’s fiscal 2022 budget, which raised tax rates on high earners to their highest levels ever after adjusting for deductibility.
Income millionaires generate more than 40 percent of total state income taxes by New York residents, so the continuing erosion of this portion of the tax base—which was occurring even before the pandemic and this year’s tax hike—represents a threat to revenue growth in the long term.
President Biden’s $1.75 trillion Build Back Better Act, passed by the U.S. House of Representatives last month and now awaiting action in the Senate, includes a provision that would raise the SALT deduction cap to $80,000 through 2030, at which point it would return to $10,000. But this will do very little to offset the increased state and local tax burden on New Yorkers with incomes above $1 million—whose SALT deductions as of 2017, the last year prior to the cap, averaged nearly $534,000.
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