New Yorkers earning between $150,000 and $750,000 fell by almost 6% between 2019 and 2020, according to the NYC Independent Budget Office. The number of real high earners ($750,000+ per year) dropped by nearly 10% in that time. The speculations as to the way these wealthy residents are leaving the state are because of the high tax rates. However, it is hard to put a finger on why exactly, as it can be a multitude of different reasons. Regardless, the loss of high-earners can significantly impact the city’s income tax revenue.
Florida
The Sunshine State attracted the most households with high incomes. The number of Florida taxpayers reporting a household income of at least $200,000 in 2020 grew by 32,019, according to SmartAsset. It is important to note that the state also lost 11,756 high-income filers during the year, resulting in a net gain of 20,263 high-income filers.
Carl Icahn, a billionaire activist investor, was among the ultra-high earners who moved to Florida. Born in New York City, the 86-year-old ran his business there for decades. In 2020, he moved his office to Sunny Isles Beach, Florida.
Florida’s weather – especially for those who live in the Snowbelt – is one of its obvious advantages. It’s one of the few states in the country that doesn’t charge its resident’s state income taxes, so Florida is a popular destination for high earners.
Texas
Like Florida, Texas is another state that does not charge its resident’s income tax, making it another popular choice for high-income earners to relocate to. In 2020, the state had 18,417 tax filers who make at least $200,000 move to Texas, while 13,061 high-earning filers departed. Showing a net gain of 5,356 high-income households for the Lone Star State.
Aside from the absence of the income tax, Texas is also home to some of the more affordable costs-of-living in the country, with an average home price of $315,831, well below the national average of $357,589. NYC, however, has average home values of $782,640. One final note, the state is also home to a booming economy and plenty of job opportunities, with an annual job growth rate of 5.4% from October 2021 to October 2022.
Arizona
Arizona saw a net gain of 5,268 $200,000+ earners in 2020, rounding out the top 3. Unlike Florida and Texas, however, Arizona does have an income tax. For 2023 they will have a 2.5% flat tax rate, once it comes into effect, will be the lowest in the country. “It’s time to deliver lasting tax relief to Arizona families and small businesses so they can keep more of their hard-earned money,” says Governor Doug Ducey. “This tax relief keeps Arizona competitive and preserves our reputation as a jobs magnet and generator of opportunity.”
Wrap Up
This new influx of high-earners is sure to put a decent dent into the income tax revenue for the state of New York. As mentioned earlier, it is hard to pinpoint the exact reason these high-earners are leaving the state but the 3 above states do have 2 things in common, either no or very little income tax, and warm weather.