Carl Icahn has already left New York. Dan Sundheim is planning to leave. Larry Fink is staying, but is worried about its future.

New York was struggling to retain some of the world’s richest people and the firms they operate even before Governor Andrew Cuomo and state lawmakers hiked taxes on millionaires and billionaires. Wall Street’s biggest names—including Goldman Sachs Group Inc., Apollo Global Management Inc. and Point72 Asset Management—are taking steps to expand elsewhere, especially Florida.

Key to the Sunshine State’s allure is its income tax—it doesn’t levy any. By contrast, New York City’s wealthiest now face the highest state and local rates in the U.S.

“There definitely is an unprecedented migration of high-net-worth taxpayers from New York City, and some of them are taking their businesses with them,” said Timothy Noonan, a law partner at Hodgson Russ who specializes in tax residency issues. “With rates set to go up, they are ready to get out.”

When hedge fund billionaire David Tepper left New Jersey in 2015 for Miami, his move prompted consternation over the size of the hole the Garden State’s biggest taxpayer would leave in its budget (he returned in 2020, paying an estimated $120 million to the state last year). Now, neighboring New York faces a bigger loss in revenue if an exodus to Florida accelerates among the financial industry’s upper echelon.

To be sure, even if some of the wealthy leave permanently, the fiscal impact would be relatively small compared with the threat of millions of tourists and office workers staying away from Manhattan. What’s more, rich taxpayers who fled during Covid-19 may find it difficult to stay away. And at least some members of the top 0.1% were already returning this spring, as Florida gets hotter and more humid.

With residents busy getting vaccinated and betting on a post-pandemic boom, there’s some hope that New York may once again find a way to bounce back after a crisis.

But if New York City’s crown as the financial capital of the world starts to slip, the first signs will be in the investing business. While banking dealmakers and hotshot advisers may eventually go back to meeting clients face-to-face, hedge fund managers can—at least in theory—execute trades as easily from a Palm Beach mansion as a Midtown Manhattan high-rise.

The $42 billion Elliott Management Corp. has seen several of its highest-paid executives leave Manhattan. Jesse Cohn, managing partner at the firm, and Jon Pollock, the company’s co-chief investment officer, have moved near its new headquarters in West Palm Beach. Paul Singer—Elliott’s founder—has also left the city, but is staying in the Northeast.

Other hedge fund titans are also moving to Florida permanently. Scott Shleifer, co-founder of the private equity unit at the $40 billion Tiger Global Management, bought a $132 million house in Palm Beach, where he plans to relocate. Sundheim, who runs the $20 billion D1 Capital Partners, is relocating near his new office in Miami.

New Yorkers, rich or otherwise, have been moving to Florida for decades, particularly as they got older. The tax savings from such moves were boosted in 2018, after the passage of a Republican reform that capped the state and local tax deduction at $10,000. The new law meant the wealthy could no longer lower their federal taxes by deducting millions of dollars in state and local levies—a change that made states without an income tax like Florida and Texas more appealing.

Some rich New Yorkers, like Icahn, did move to Florida in the aftermath, but the total number of rich taxpayers in New York held steady, and tax revenues kept rising.

“We’ve had high taxes and it hasn’t driven all the multi-millionaires out,” said George Sweeting, deputy director of the city's Independent Budget Office. The question is whether that may change, he said. “We don’t know what the limit is. At what point does it become more than people are willing to pay? Theoretically there is some point there.”

Hedge fund partners who move to Florida, but keep staff and operations in New York, will still owe some tax in the Empire state. And larger firms find it more difficult to disentangle themselves from the city, said Steven Winter, a partner at Grant Thornton.

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