screen-shot-2014-07-21-at-9-07-48-am-150x150-1740692Most high-income New York City residents who left the city in 2012 moved to neighboring jurisdictions, according to a new analysis of federal Census data by the city Independent Budget Office (IBO).

Among households with incomes above $500,000, 42 percent moved to New York suburbs, 22 percent moved to New Jersey and 12 moved to CT in 2012, the IBO says. New York households with lower incomes were less likely to move to neighboring states and more likely to move to low-tax Florida.

An article in today’s New York Times cites the IBO numbers as evidence that (as the headline trumpets) “Wealthier New Yorkers Aren’t Fleeing the City for Tax Havens.”

That’s a real stretch. In fact, while New York State, New Jersey and Connecticut are not known for low taxes, they are tax havens compared to New York City, which imposes a 3.9 percent resident income tax on top of state income taxes.  Consider the following chart:

screen-shot-2014-07-21-at-8-14-58-am-3285664

A couple with income of $2 million a year can save roughly $70,000 a year in city income taxes by moving to a New York suburb, $80,000 by moving to New Jersey, and $100,000 by moving to Connecticut. While a chunk of those savings could be eaten up by higher suburban property taxes, many such families also move to save on private school tuitions they pay in the city.

The difference in income taxes is only part of the story. New York City also imposes a unique 4 percent tax on the profits of unincorporated businesses and professional partnerships. This effectively more than doubles the local tax on the incomes of many investment bankers, lawyers, accountants, physicians and other professionals living in the city. The unincorporated business tax is not based on an individual’s residence; it can only be avoided by moving an entire firm out of the city. This was another factor behind the proliferation of hedge funds in Connecticut, where property taxes are also somewhat lower than in New York State or New Jersey.

IBO’s analysis — the latest in a series of occasional “New York City by the Numbers” features on its website — also suggests that California was the third most popular destination for high-income households, drawing 9 percent of those who moved in 2012. California is the only state with a higher top income tax rate (13.3 percent) than New York City’s. Both tax and Census data have long reflected movements of high-income households between the two states, which surely includes more than a few well-paid actors and entertainment moguls who find it necessary to be in one place or the other.

The Times article touting the IBO analysis begins by citing Sean Hannity’s threat to move from Long Island to Florida, and actor Gerard Depardieu’s tax-avoidance move from France to Russia, and then notes (further down in the story) that former Mayor Michael Bloomberg was critical of Mayor Bill de Blasio’s unsuccessful proposal to raise the city income tax. Oddly, however, it doesn’t actually quote anyone making what it calls “the frequent assertion that wealthy people reflexively flee New York City …  for low-tax states.” 

In fact, the “frequent assertion” cited in the Times is not frequently made by serious critics of the city’s tax policies. No one familiar with tax or census data would claim there has been an exodus of high-income New Yorkers to ultra low-tax states. The main argument against New York’s higher income taxes is that they stifle growth and discourage investment in the city compared to competing jurisdictions that undeniably offer similar advantages at a lower cost.

The bottom line: any high-income New York City resident determined to save money on his or her  taxes can do so simply by stepping across the border in any direction.  The Times is hyping the IBO numbers to slay a straw man.

(By the way, the IBO bases its analysis on a Census Bureau microdata file that has very small sample sizes at the high end of the income scale. As a result, it is difficult to assess the statistical significance of a reported increase in migration by high-income households to neighboring suburbs between 2008 and 2012, or a decrease in migration to California during the same period, which is also shown by the analysis.)

About the Author

E.J. McMahon

Edmund J. McMahon is Empire Center's founder and a senior fellow.

Read more by E.J. McMahon

You may also like

The Health Department’s response to a FOIL request for nursing home data triggers 2020 déjà vu

Despite Governor Hochul's promise of transparency, the Health Department keeps responding to requests for COVID data with tactics from the Cuomo administration Read More

How Are the Billions in Emergency Aid to New York Being Spent?

A new  posted yesterday on the Comptroller’s website could become the lens through which New Yorkers see how tens of billions of dollars in one-shot federal funding is being spent by governm Read More

Hochul’s Emergency Order Imposes Insurer Restrictions Sought by Hospital Group

Buried in Governor Hochul's emergency order on health-care staffing is a temporary bar against insurance companies challenging claims submitted by hospitals–and an influential hospital association is taking credit. Read More

Home Care Agencies Project Widespread Staffing Shortages in the Next Phase of New York’s Vaccine Mandate

Agencies providing home-based care to elderly and disabled New Yorkers face a large-scale loss of employees when the next phase of the state's vaccine mandate takes effect on Oct. 7, according to a newly released industry s Read More

Remembering the scandal that brought down Health Commissioner Howard Zucker

The resignation of Dr. Howard Zucker as state health commissioner marks the end of a term marred by scandal over his role in managing the coronavirus pandemic. The much-debated compelling nursing homes to admit COVID-positive patients, though it origi Read More

As leaves turn, NY’s post-pandemic recovery still has very far to go

Entering the second autumn since the COVID-19 outbreak of March 2020, the pace of New York State's pandemic economic recovery has been abysmal by almost any standard. New York was the national epicenter of the pandemic, and Governor Cuomo's "" business Read More

More NY job gains in August—but employment needs to rise a lot further

New York's jobs report for August looked relatively strong—but only by comparison, that is, with . On a seasonally adjusted basis, New York gained 28,000 private-sector jobs last month—a growth rate of 0.4 percent, according to . This was double th Read More

Projected PIT Haul Brightens State Budget Office’s Fiscal Forecast 

Stronger than expected tax payments this spring led the Governor’s Division of the Budget (DOB) to increase its personal income tax (PIT) revenue projections for the next four years by $8.5 billion above its April pr Read More

Subscribe

Sign up to receive updates about Empire Center research, news and events in your email.

CONTACT INFORMATION

Empire Center for Public Policy
30 South Pearl St.
Suite 1210
Albany, NY 12207

Phone: 518-434-3100

General Inquiries: Info@EmpireCenter.org

Press Inquiries: Press@EmpireCenter.org

About

The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.

Empire Center Logo Enjoying our work? Sign up for email alerts on our latest news and research.
Together, we can make New York a better place to live and work!