New York is experiencing a notable decline in its millionaire population, a trend that presents a challenge for the state's burgeoning socialist movement, including Mayor Mamdani and the Democratic Socialists of America (DSA).
A report from the Citizens Budget Committee indicates that New York's share of millionaires, defined as individuals earning over $1 million annually, has decreased more than any other state since 2010. The state's proportion of the nation's millionaires dropped from 12.7% to 8.7% during this period. Furthermore, recent data shows that high earners are leaving New York at a faster rate than lower earners.
This migration of wealthy individuals creates a complex situation for the DSA and its political allies. DSA campaigns often target millionaires and billionaires, attributing economic struggles to their influence. However, the funding for the social programs advocated by the DSA relies heavily on taxes paid by these same high-earning residents.
During his campaign, Mayor Mamdani proposed a 2% tax increase on millionaires. The New York City DSA chapter has also suggested raising taxes on individuals earning over $300,000 annually, as well as on capital gains and inheritances. Despite these proposals, New York already has some of the highest tax rates in the nation, ranking second nationwide in the percentage of income collected as taxes. New York City's tax rates for wealthy residents are reportedly the highest in the country.
While proponents of higher taxes often argue that such measures will not significantly deter the wealthy from staying, economic studies suggest otherwise. Research by economists Joshua Rauh and Ryan Shyu demonstrated that a state income tax hike in California led to nearly 1% of top taxable incomes leaving the state within a year, ultimately reducing the anticipated tax revenue. Another study by Enrico Moretti and Daniel Wilson found that a 1% increase in after-tax income in a state attracted nearly 2% more top scientists, while tax increases had the opposite effect.
Between 2019 and 2023, New York lost over $7 billion in annual taxpayer income to Fairfield County in Connecticut and a similar amount to Palm Beach County in Florida due to such factors. Some on the left have viewed the departure of the wealthy as a positive development, with Seattle's socialist mayor, Katie Wilson, suggesting that those who leave are simply making way for others.
This phenomenon, sometimes referred to as the "Curley effect" after former Boston Mayor James Michael Curley, involves politicians potentially driving away affluent residents to consolidate their political base. However, cities and states may struggle to sustain themselves if their tax base continues to shrink. The ambition of building socialist programs within a single state or city is challenged by the inherent mobility of affluent individuals, who can relocate to avoid high tax burdens.