New York City is filled with anecdotal stories about rich people moving to Florida for lower taxes. A columnist in the New York Post wrote this year that, “One friend says 10 wealthy people have told him they are leaving and another says disgusted New Yorkers bought $1 billion in residential property in Florida.”
Former Mayor Michael Bloomberg once said that “whether you think it’s right or not, the wealthy are mobile.”
They are mobile. But the data suggests that few of them are mobilizing to Florida.
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A new report finds that wealthy New York City residents don’t leave New York City at a greater rate than the non-wealthy. The report, from the non-partisan Independent Budget Office, found that 1.8 percent of those earning more than $500,000 left the city in 2012—or the same rate as lower-income households.
What’s more, it found that when the New York City rich move, the largest number move to other areas of New York state. Fully 42 percent of households with $500,000 or more who moved relocated within New York State, the report said.
Ranked No. 2 was New Jersey, with 22 percent, followed by Connecticut, at 12 percent. California ranked fourth, with 9 percent. And Florida? It tied for sixth with Massachusetts, at 2 percent.
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So New Yorkers aren’t leaving at a greater rate, and when they do leave they move to high-tax states nearby, suggesting that proximity to New York is still more important than taxes in determining where the rich live.
But that doesn’t mean taxes are irrelevant. New Jersey and Connecticut both have lower taxes than New York City. Someone leaving New York City for New Jersey would see their income-tax bill reduced to 8.97 percent from a top rate of 12.96 percent (8.82 percent for state taxes and 3.876 percent for city taxes). A move to Connecticut would result in a tax rate of 6.7 percent, cutting the tax bill almost in half.
Even a move from the city to another area of New York state gets around the city’s 3.86 percent income tax.
The other caveat here is that the data only goes to 2012.
Kathryn Wylde, president and CEO of Partnership for New York City, a business advocacy group, said that is a problem. The 2013 numbers, she said, are likely to show a spike in wealthy New Yorkers moving out because of the 2013 federal income tax hikes and the extension of New York’s so-called “millionaire’s tax.”
The federal tax hikes, she pointed out, brought the combined federal, state and city taxes of top-earning New York City residents to 54 percent. That, she said, marked a “tipping point,” since people don’t like to pay more than half of their earnings to taxes. (Though local taxes can be deducted from federal so very few people, if any, actually pay 54 percent.)
“When you get to anything over half, you’re risking a real loss,” she said. She added that when London hiked its top tax rate to over 50 percent, it ended up backing down.
Of course, we won’t know whether the tipping point was reached until the 2013 data come out. For now, it seems fears of a mass millionaire migration from New York to Florida isn’t happening.