The latest release of the IRS Statistics of Income, examined by a policy research institute, overturns the long-standing narrative that wealthy households abandon jurisdictions with aggressive tax codes. Six jurisdictions—California, Connecticut, Massachusetts, New Jersey, New York, and the District of Columbia—rank among the most progressive in the nation, yet they also host the highest concentration of million-dollar filers and have witnessed steady growth in that cohort since 2010.
Rising millionaire counts in the nation’s most progressive states
Between 2010 and the most recent year available (2023), the number of taxpayers reporting adjusted gross incomes above $1 million rose markedly in each of the six high-tax areas. In New York, the share of millionaires among all filers climbed again in 2023, despite the state’s 2021 decision to increase the marginal rate on incomes exceeding $1 million. By contrast, Florida—often cited as a low-tax haven—saw its millionaire share dip during the same period, underscoring that tax differentials are not the sole driver of wealth migration.
Why high-income households aren’t fleeing tax hikes
Emily Eisner, executive director of the Fiscal Policy Institute, explains that the affluent are “simply not that sensitive” to state tax rates because the levies remain below the threshold that would alter their location decisions. The data support this view: New York’s count of million-dollar earners rose from 57,126 in 2016 to 68,068 in 2019, and after the 2021 tax increase it surged another 21 percent to 84,366. Simultaneously, the number of millionaires who left the state fell to 1,453 from nearly 2,000 the previous year. The squeeze is being felt farther down the income ladder; families earning $100,000-$500,000 experience the steepest effective tax burden, especially in the city where high wages often feel offset by soaring living costs.
Property taxes and the “mansion tax”
New York’s tax landscape extends beyond income. In 2019 the state expanded its transfer tax on residential sales above $1 million, introducing a graduated scale that climbs to 3.9 percent on transactions exceeding $25 million. Even with this additional levy, the state’s millionaire count and its national share continued to increase, suggesting that the broader tax package does not deter the very wealthy from purchasing premium real estate in the city.
Debate over flat versus graduated taxes
A contrasting perspective comes from a recent briefing by the Cato Institute, which found that states that switched from progressive to flat income taxes experienced a temporary boost of roughly one percentage point in per-capita income and GDP growth for five to seven years. Colorado, the pioneer of the flat-tax experiment in 1987, posted a per-capita income about 5 percent higher a decade later than peer states. However, the uplift faded after the first decade, and the paper’s author, Adam N. Michel, cautions that the gains are short-lived and do not translate into a larger economic pie for all states. Colorado’s upcoming Proposition 87, which would restore its graduated system, illustrates the political pendulum swinging back toward progressivity.
Political pushes for wealth taxes and the reaction of the ultra-rich
Progressive legislators in several states have floated wealth-tax proposals aimed at ultra-high-net-worth individuals. One initiative would levy a 5 percent annual tax on net worth above $1 billion, targeting roughly 1,000 U.S. billionaires and potentially raising $370 billion a year—a figure that, while sizable, represents only a fraction of the federal interest burden on the national debt. At the municipal level, a mayor’s plan to add a 2-percentage-point surcharge on incomes over $1 million would affect about 34,000 households, raising city revenues by an estimated $3 billion annually out of a $126 billion budget. Critics argue that such measures accelerate the “flight of businesses,” citing statements from hedge-fund leaders who attribute recent relocations of offices and personnel to the perceived hostility of the new tax proposals.
Implications for middle-income earners and the broader economy
While the wealthiest brackets appear relatively insulated from marginal tax hikes, the ripple effects are felt by households earning between $100,000 and $500,000, who encounter higher effective rates and tighter budget constraints. Moreover, the potential exodus of high-skill entrepreneurs could erode the ecosystem that supports a wide range of ancillary jobs—from construction to retail—thereby widening the fiscal gap the higher taxes aim to fill. The evidence suggests that merely raising rates does not guarantee increased revenue; instead, it can reshape the geographic distribution of both wealth and economic activity.
