More specifically, New York City might be better preparing itself for an impending wealth flight. This follows the heels of Zohran Mamdani’s stunning upset primary victory to be the next mayor. Mamdani’s platform includes a controversial new proposal to fund a “millionaire tax.” This tax would impose a new 2% surcharge on New Yorkers earning more than $1 million annually. This move has sent shockwaves among critics. They’ve fought back by claiming his policies will see high demand earners and businesses flocking away from the city.
Mamdani’s main victory has brought resurgent hope of a new exodus of New Yorkers. Now business owners and rich people are crying foul. They are concerned that his tax, as proposed, would nudge thousands into making the move out of the City. The potential for increased taxes and a shift in public safety policies raises questions about the future economic landscape of the city.
Critics are most appalled, though, by Mamdani’s approach to public safety and police-community relations. They argue that his approach could lead to increased crime rates, making the city less attractive for both residents and businesses. With anxiety about the future growing, civic leaders and deep-pocketed New Yorkers are weighing their options. Their concern is that these policy reversals will accelerate the current reversal trend of migration.
The proposed millionaire tax to strengthen city revenue might in practice do the opposite by scaring off the high earners it hopes to attract. According to Jared Walczak, “New York City can only tax its own residents.” Wealthy people will just relocate to suburbs like Long Island or Westchester County. This change would greatly reduce the city’s tax base.
Furthermore, recent data from multiple sources shows that despite the looming tax proposal, the luxury real estate market in New York remains robust. The period between June 23 and July 13 was the height of this spike, with 64 contracts signed for apartments over $4 million. That’s a big jump of 13% over the previous year. Donna Olshan of Olshan Realty notes, “The luxury market is on pace for one of its best years.” That’s a good sign that we haven’t completely lost all the high earners to more opportune pastures outside the big city.
The fiscal repercussions of Mamdani’s tax policy are substantial. Amongst other things, he wants to raise additional revenue from the top 1% of earners who already provide more than 40% of the city’s income tax receipts. A handful of these taxpayers lost can set off a downward death spiral. As critics point out, the revenue lost will only mean fewer and lower quality city services, ultimately pushing people to leave for the suburbs even more.
There are legal limitations on Mamdani’s ability to raise taxes too. Advocates argue that should he win the general election come November, he cannot unilaterally raise income taxes. He’ll need state approval, then, to make that happen. Under his plan, the total federal/state/city tax rate for top earners would reach 53.776%. This good potential increase comes with a big question—can it be implemented successfully?
Governor Kathy Hochul has voiced her concerns about this potential exodus of wealthy residents, stating, “I don’t want to lose any more people to Palm Beach.” This impulse exemplifies the urgency many feel to keep New York’s high earners from fleeing the state as costs and taxes continue to climb.
For one, analysts are admitting that New York City is utterly irresistible to rich people. Despite the challenges posed by Mamdani’s policy proposals, they think that the city’s allure still rests. A report from Altrata and REALM emphasizes that “New York remains a powerful magnet for the wealthy, offering a blend of luxury consumption, vibrant culture, high-quality education and lifestyle cachet.” Nowhere does that impulse find purer expression than Manhattan, the ultimate magnet for ultra-wealthy scions of status looking for an elitist’s paradise.
Economist Gusdorf highlights that empirical evidence suggests that higher tax rates imposed on top earners might not have substantial behavioral effects. “There is a strong indication that higher tax rates at the state level imposed on the top earners are not having real behavioral effects,” Gusdorf states. This point of view suggests the panic over wealth migration is overblown.