Open Letter: Economists Set the Record Straight on Millionaire Tax Migration in New York              

Economists including Gabriel Zucman, Emmanuel Saez, Darrick Hamilton, and Isabella Weber agree, high-earner income tax increases raise revenue and do not motivate significant outmigration. Originally published in AMNewYork. View full list of signatures on New York City Policy Forum.            

For many weeks, a high profile    debate over the economic impacts of millionaire tax migration on New York    has played out in the realm of public opinion: When legislators propose tax    increases for high-income earners and profitable corporations, pundits and    politicians sound the alarm that New York City’s wealthy will leave. Debate    on this issue reached a fever pitch with the election of Zohran Mamdani to    the mayor’s office. Without raising taxes, policies that would    substantially improve the lives of working- and middle-class    families—universal childcare, free buses, and two hundred thousand units of    new affordable housing construction—will be jeopardized. The fate of such    programs turns on the question of how New York’s taxes shape the City and    State economy.    

The case of high-earner tax    migration poses the following economic questions: Will increased tax    burdens cause high earners to leave New York City or New York State? If so,    will they move in such high numbers as to decrease tax revenues? If not,    are there other negative economic consequences for increasing top tax rates    and potentially losing some number of high earners?

Recent evidence suggests the    out-migration tradeoffs of raising income taxes on high earners are    minimal. Such taxes may cause a very small number of millionaires to move,    without undercutting public revenue generating potential. Recent examples    of tax increases on high earners in both New York and Massachusetts demonstrate large revenue gains.

The underlying economic    question concerns elasticity—for every 1 percent increase in the top    marginal tax rate, what percentage of high earners will leave the    jurisdiction subject to tax increase? In 2016, Cristobal Young, Charles    Varner, Ithai Z. Lurie, and Richard Prisinzano analyzed tax increases on top earners in all fifty states and    found an elasticity of approximately 0.1. That is, a 1 percentage point    increase in the top marginal tax rate results in a 0.1 percent increase in    outmigration flows—a nonzero, but still very small effect. The impact is    likely even smaller in New York City, given the amenities and economic    benefits of living in New York.

Similarly, Henrik Kleven published a working paper last year about    potential downstream effects of increased taxation rates, accounting for    positive results including decreased rent-seeking from employers and    negative impacts such as reduced “trickle down” expenditures. The    preliminary application of Kleven’s model found that the US would likely    benefit from substantial increases in its top tax rate before    externalities would begin to wipe out overall economic benefits.

Building on this academic    literature, the Fiscal Policy Institute has published extensive research on the nature of    outmigration in New York City. They found that the top 1 percent of earners    are the least likely to move out of New York City, compared to    the top 95–99 percent and bottom 95 percent income brackets.

The COVID-19 pandemic was the    only major differential driver of high-earner outmigration in recent years.    New Yorkers in the top income quintile were the most likely to leave the    City during the lockdown, having much greater access to remote work than the    general population.

In contrast, the past two    major effective tax increases in New York have had comparatively minimal    effect. The 2017 tax hike produced statistically negligible high-earner    outmigration and the 2021 millionaire tax corresponded to a    huge reduction in the rates of high-earner outmigration, as the    large impact of the pandemic normalized.

FPI also tracked the destinations of outmigrating residents of New York City and found that    three-fourths of the highest earners who leave move to other states with    high income tax rates, such as Connecticut, New Jersey, and California,    making it unlikely that the pursuit of lower taxes was a motivator for    their move.    

The evidence is overwhelming    and clear. Tax outmigration has a minimal effect on the tax bases of state    governments seeking to tax the rich. It is a myth that top tax increases    undercut New York’s overall tax base by driving away wealthy residents. For    decades, this fiction has influenced New York City and New York State to    undertax their wealthiest households and underfund vital social services    and public infrastructure projects—placing lower- and middle-income New    Yorkers at ever increasing risk of being driven out of New York City.

As the New York State    legislature makes final considerations about the fiscal year 2027 budget,    we, the undersigned, urge legislators and the governor to dismiss unfounded    concerns of tax outmigration.

Gabriel Zucman, Paris School of Economics    

Emmanuel Saez, University of California Berkeley

Darrick Hamilton, The New School

Isabella Weber, Economics professor, UMass Amherst

Sandile Hlatshwayo, International Monetary Fund

James A Parrott, Senior Fellow, Center for NYC Affairs at The New School

J.W. Mason, John Jay College, CUNY

Lauren Melodia, Center for New York City Affairs

Anisha Steephen, The Roosevelt Institute

Melanie Brusseler, Common Wealth

Rakeen Mabud, Common Wealth

Nathan Tankus, Notes on the Crises

Lenore Palladino, University of Massachusetts Amherst

Kitty Richards, Senior Fellow, Groundwork Collaborative

Weayonnoh Nelson-Davies, Economic Progress Institute

Lygia Sabbag Fares, John Jay College of Criminal Justice

Alex Jacquez, Groundwork Collaborative

Michael Ash, University of Massachusetts Amherst

Joseph Palomino, Arizona Center for Economic    Progress

Leila Davis, University of Massachusetts Boston

Debipriya Chatterjee, Fiscal Policy Institute

Sina Sinai, Jain Family Institute

Ceren Baysan, University of Toronto

David Dyssegaard Kallick, Immigration Research    Initiative

Elizabeth Cooper, Fiscal Policy Institute

Emily Eisner, Fiscal Policy Institute

Andrew Perry, Fiscal Policy Institute

Martin Bernstein, Harvard University (PhD student)

Breyon Williams, Groundwork Collaborative

Mark Paul, Rutgers University

Nicole Rodriguez, New Jersey Policy Perspective

Geert Dhont, John Jay College, CUNY

Alexandra Sirota, NC Budget & Tax Center‍

The Fiscal Policy Institute (FPI) is an independent, nonpartisan think tank that advances sound and equitable fiscal policy to strengthen New York’s economy through research, analysis and strategic communications.