New York City braces for wealth flight with Mamdani's political rise

CNBC

5 days ago

Zohran Mamdani's primary win in New York City's mayoral race and proposal to raise taxes on millionaires have touched off fears of a new wave of wealth flight from the city. Yet so far, there is little evidence of a slowdown in high-end real estate or real wealth losses in New York.
Florida real estate brokers say they've seen a surge in inquiries from the New York wealthy looking to move to Miami or Palm Beach. Business owners are threatening to leave the city or close. And New York developers, caught in the crosshairs of Mamdani's rent control platform, have banded together to fund Mamdani's opponents in the November general election.
At the center of the economic concern is Mamdani's so-called "millionaire tax." He's proposed an additional 2% tax on New Yorkers earning more than $1 million a year. Added to the city's current top rate of 3.876%, the tax would bring the combined New York City and state tax to 16.776%, by far the highest in the country. The combined federal, state and city rate would be 53.776%.
And New York's high earners won't have to go to Florida to avoid the tax. They can simply move to neighboring Long Island or Westchester County or even New Jersey. Unlike New York state, New York City can't tax people who work in the city but have their primary residence elsewhere.
"New York City can only tax its own residents," said Jared Walczak, vice president of state projects at the Tax Foundation. "A high earner doesn't need to give up the convenience of the city, they just need to move outside the five boroughs. Migration across city lines is the easiest."
Importantly, Mamdani wouldn't be able to raise income taxes. The city's income tax rates are set by Albany, where Gov. Kathy Hochul has said she will block any tax hike. "I don't want to lose any more people to Palm Beach," Hochul told the New York Post.
Critics also fear Mamdani's policies toward the police and public safety could make the city even more dangerous, becoming the final straw for many business owners and top earners who were already considering leaving. The top 1% of New Yorkers pay over 40% of the income taxes, so losing even a small number of high earners would set off a downward spiral of lower revenue and lower services and more out-migration.
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New York state had a net loss of $14 billion in net adjusted income due to taxpayers leaving between 2021 and 2022, according to the Tax Foundation and IRS data. The city's revenue from personal income taxes declined between 2022 and 2024, from $16.7 billion in 2022 to $14 billion last year — although they're still above the pre-Covid levels of $13.4 billion in 2019, according to data from the New York City comptroller.
At the same time, however, there are signs that New York's powerful wealth machine is constantly replenishing the ranks of millionaires and billionaires, more than making up for the rich who move out. The number of millionaires in New York City has more than doubled over the past decade — despite the Covid losses — to over 2.4 million, according to Altrata. There are now over 33,000 New Yorkers worth $30 million or more, nearly double that of Miami, according to Altrata. Whether it's measuring millionaires, multi-millionaires or billionaires, New York City has maintained its dominance as the richest wealth hub in the world.
"New York remains a powerful magnet for the wealthy, offering a blend of luxury consumption, vibrant culture, high-quality education and lifestyle cachet, with the borough of Manhattan the epicenter of ultra-prime real estate," said a report from Altrata and REALM.
Demand for pricey luxury apartments in New York also shows no signs of slowing, even after Mamdani's win in the June 24 primary. There were 64 contracts signed between June 23 and July 13 for apartments priced over $4 million, up 13% over last year, with a sales total of more more than $555 million in sales, according to Olshan Realty. Among the signed contracts was a $35 million, three-bedroom spread on Fifth Avenue that was first listed in December.
"The luxury market is on pace for one of its best years," said Donna Olshan, of Olshan Realty, who also cautioned that any potential Mamdani-related weakness could show up in the Fall.
Not only did New York's millionaire and billionaire population rebound quickly after Covid, but high earners also bounced back. While the city lost a net 5,000 households earning $1 million or more during the pandemic, their ranks have grown from 30,400 in 2019 to 34,127 in 2022, the latest period available, according to the Fiscal Policy Institute.
Nathan Gusdorf, executive director of the Fiscal Policy Institute, said the narrative of wealth flight from New York is fed in part by the media, which highlights a small number of high-profile billionaires who move from New York to Florida. Stories about billionaires like Josh Harris, Carl Icahn and Daniel Och decamping to Florida ignores the broader ebb and flow of wealth in New York. New York's powerful economy, fueled by the financial services industry, continues to produce more new millionaires than it loses.
"We do not have a fixed population of millionaires that just declines whenever one of them leaves," Gusdorf said. "The city regenerates that lost millionaire population."
Even if Mamdani were to win the mayorship in November and raise taxes, the direct impact on wealth flight may be more limited than many expect. According to the Fiscal Policy Center's latest research, the top 1% of New Yorkers by income (those making more than $800,000 a year) leave the city at one quarter the rate of all other income groups. When the New York wealthy do move, they have most often oved to other high-tax states like New Jersey, Connecticut or California – suggesting lifestyle rather than taxes are the driver.
"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 said.
Others, however, say taxes have outsized importance for the wealthy, proven by the sweeping population moves in recent years from high-tax to low- or no-tax states like Florida and Texas.
A study by the California Center for Jobs and the Economy described a "taxodus," or net loss of $5.3 billion in personal income tax, from high earners who left after a 2016 extension of higher taxes on the wealthy.
"High tax rates do lead to outmigration and lower income growth," Walczak said.