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Wealthiest New York residents stay put after pandemic-driven exodus, despite tax increases, study finds

Jan. 4, 2024 By Ethan Marshall

The COVID-19 pandemic led to more of the highest-earning residents of New York State who make at least $815,000 a year to leave for other states. However, they are now much less likely to move away than those in the middle class and working class, according to a study by the research and education organization Fiscal Policy Institute.

The increase during the pandemic was in large part due to more wealthy residents being able to afford leaving the state and moving to less populated areas. Due to the nature of how COVID-19 is spread, many of these residents were quick to leave the state for these areas.

Prior to the pandemic, working and middle-class residents were leaving New York at a rate four times more than these wealthy residents. By the second half of 2022, the wealthiest New Yorkers were back to moving out at the comparatively low levels seen before the pandemic.

Another factor in more wealthy people moving out of New York during the pandemic was that many jobs converted to work-from-home. This was much more common in high-paying and high-skilled fields. Those in the top 5% of the wealthiest residents in the state worked from home at more than double the rate of the remaining 95% in 2021 and 2022. These wealthy residents who once had no choice but to live near their place of work suddenly had the opportunity to move freely thanks to the option of working from home.

One big conclusion reached in the study was that raising taxes on wealthy residents did not lead to an increase in them leaving the state. The out-migration rate among these wealthy residents had very little change following a 2017 tax increase. While there was an increase in out-migration experienced after a 2021 tax increase, this was due to the pandemic rather than higher taxes on the rich. Many of these residents ended up moving to other states with high tax rates. An estimated 73% of high earners who left New York moved to such a state. Despite two income tax hikes in New York State since 2017, the population of wealthy New Yorkers has gone up since then.

Even as many of the state’s high earners moved out at the height of the pandemic in 2020 and 2021, the population of high earners ended up growing in the state, thanks in large part to a strong economy and higher wages at the time. From 2020-2022, approximately 2,400 millionaires disappeared from the state. However, another 17,500 millionaires emerged, thanks in large part to increased wages pushing many into higher income groups.

Strong financial markets and capital gains income pushed the collective income of tax filers with more than $1 million in income to $407.5 billion in 2021 — 39.9% higher than in 2020. While they only accounted for 1.6% of tax filers, they represented 35.5% of all income reported on New York tax filings in 2021.

“In order to address New York’s recent population loss, we must first understand who is leaving — and what is pushing them out the door,” FPI Director Nathan Gusdorf said. “Contrary to conventional wisdom, the richest do not leave the state more frequently than other New Yorkers; rather, they typically leave at one quarter the rate of the general population in normal, non-Covid years. Additionally, the evidence dispels the myth that the rich are moving away in search of lower taxes. This analysis finds that tax hikes do not provoke any significant increase in high earner migration out of the state — and when high earners do leave, they are more likely to move to other relatively high tax states than to a low tax state.”

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