Wealthy Stay in High-Tax States, IRS Data Shows

New Internal Revenue Service (IRS) data, analyzed by the Fiscal Policy Institute (FPI), suggests that millionaires are not leaving states with progressive tax systems, contrary to common assumptions. The analysis of IRS Statistics of Income data reveals that states with the most progressive tax structures, including California, Connecticut, Massachusetts, New Jersey, New York, and Washington, D.C., exhibit the highest concentration of millionaires per filer. Furthermore, the number of millionaires within these states has seen growth since 2010. New York, specifically, experienced an increase in its millionaire share in 2023, the most recent year for which data is available, even after implementing a tax rate increase on incomes exceeding $1 million in 2021. In contrast, Florida, a state often perceived as a tax haven, recorded a notable decline in its millionaire share during the same year.

Emily Eisner, executive director of the Fiscal Policy Institute, stated in an interview with Fortune that the organization is "really not seeing any declines in the millionaire population in New York State." She posited that wealthy households "simply just aren’t that sensitive to the tax rates in the state" because, from their perspective, "the taxes aren’t really high enough for them to be sensitive to them." This observation challenges the hypothesis that significant tax increases on the wealthy directly lead to their departure from a state. The data implies that other factors, such as access to talent, infrastructure, and quality of life, may play a more significant role in wealth retention than tax rates alone.

The FPI's analysis also highlights that when tax burdens do shift, they disproportionately affect middle-income households earning between $100,000 and $500,000 annually. Eisner described the financial reality for many in high-cost-of-living areas like New York City, noting that "You’re making a lot of money relative to the population of the United States, but in New York City, you don’t feel rich at all. You still feel squeezed." This sentiment underscores the complex interplay between income, cost of living, and perceived financial well-being, suggesting that tax sensitivity among the wealthy may be less about absolute rates and more about their relative impact on disposable income after accounting for living expenses.

Historical data from New York state further supports the trend of millionaire population growth. In 2016, the New York State Department of Taxation and Finance reported 57,126 individuals earning at least $1 million. This figure rose to 68,068 by 2019, according to an FPI fact sheet. Even after New York increased its top income tax rates on individuals earning over $1 million in 2021, the state continued to see an increase in its millionaire population, as indicated by the 2023 data. This sustained growth in high-net-worth individuals in states with higher tax burdens suggests a more nuanced relationship between taxation and wealth migration than is often portrayed in public discourse.