“When you talk about this tax package you cannot talk about it without anticipating a SALT repeal,” Cuomo said. “When SALT is repealed, the taxes will be going down.” The third-term governor said he has spoken to New York’s congressional representatives and President Joe Biden, and “fully” expects a SALT repeal.
When the pandemic hit, some of the most affluent people in the city fled to other parts of the state, such as the Hamptons, while others moved to Florida or Texas, which don’t levy income taxes. The exodus has fired up real estate markets and even led New York City restaurateurs to open Palm Beach locations.
Now, with the vaccine increasingly prevalent, there are signs people are returning.
But there’s concern that some will make their moves permanent, especially as low-tax states court hedge funds and banks.
“Cuomo is making a bet that the wealthy won’t leave the state even if he raises taxes on them,” said Andrew Silverman, a tax analyst with Bloomberg Intelligence. “That’s a risky bet. It’s almost certain that people will leave the state and the city as a result of these tax increases. What’s different this time is that jobs are so mobile that people, especially wealthy people, don’t have to work where they live.”
Even though New York's budget crisis never materialized, state officials are moving forward with a tax increase that will bring the top income tax rate in NYC to 14.776%.
The biggest risk is that high earners don't come back post-pandemic. Why make it a self-fulfilling prophesy?
—Jared Walczak (@JaredWalczak) April 5, 2021
The total number of those leaving may be tiny compared to the overall population, but New York City and New York state get a disproportionate share of tax revenue from the wealthy. The state is home to more than 90 billionaires, according to the Bloomberg Billionaires Index, and the city has more than 30,000 millionaires.
The top 1% of New Yorkers reported a combined $133.3 billion in income in 2018, the latest year of data available, according to the city’s Independent Budget Office. They paid $4.9 billion in local income taxes, making up 42.5% of total income tax collected by the city.
In 2018, 1,786 tax filers earned more than $10 million or more—and the top 1%—about 38,700 taxpayers—earned almost as much as the bottom 90% of New Yorkers.
This article was provided by Bloomberg News.