There is an old joke that New York City could tax oxygen if only the air could be properly assessed and invoiced. Given recent political trends, I fully expect a future press conference announcing the “Progressive Atmospheric Equity Contribution Fee,” payable quarterly by anyone breathing south of Yonkers.
To hear some people tell it, the rich are already fleeing New York in biblical caravans. Hedge fund managers are supposedly racing across the Florida border in armored Bentleys while investment bankers rappel out of Midtown office towers carrying sacks of untaxed capital gains. Somewhere in Palm Beach, according to this narrative, there is now a gated community populated entirely by former Upper East Side residents wearing linen suits and complaining about how hard it is to find decent bagels.
The truth, as always, is less cinematic and more interesting.
There is, in fact, real evidence that wealthy people have been leaving New York City. New York’s own tax data show that millionaire out-migration increased sharply during and after COVID, with relocation rates rising well above historic norms. Some of the ultrarich, especially those earning tens of millions annually, clearly decided that sunshine, lower taxes, and fewer regulations sounded preferable to paying both New York State and New York City income taxes while carefully navigating feces-laden sidewalks on the way to dinner.
And honestly, from a purely mathematical standpoint, one can understand their concern. New York State already imposes one of the highest income tax burdens in the country. Add New York City’s local income tax on top, then pile on property taxes, corporate taxes, sales taxes, mansion taxes, congestion pricing, assorted fees, and Mayor Mamdani’s threat of a pied-à-terre tax, and eventually even a billionaire may begin quietly Googling “residency requirements in Florida.”
Florida, meanwhile, waits offshore like a giant tax-free aircraft carrier.
No state income tax. Warm weather. Palm trees. Private airports. And an endless supply of real estate agents whispering, “Sir, your taxes alone could pay for this waterfront estate.” New York tax officials admit almost 1,700 millionaires moved their tax address out of New York in just 2024. New York hasn’t released the data for 2025 or 2026, but I doubt that many moved back.
Not surprisingly, Miami and Palm Beach have become popular landing zones for finance executives and wealthy retirees. Texas has benefited too. Wealth migration toward lower-tax states is real enough that entire industries now exist to help wealthy individuals establish legal residency elsewhere while keeping one tasteful Gucci loafer still planted in Manhattan.
But before we declare New York a post-apocalyptic wasteland populated only by rats and deranged graduate students, it is worth noting that the “everyone is fleeing” story is also wildly exaggerated. New York is not in the red-light danger zone, but it is in the warning orange zone. The NYC Comptroller says the city is already operating with a structural deficit, meaning spending is already running ahead of recurring revenue, and the budget relies on optimistic revenue projections, reserve drawdowns, unspecified savings, and reduced fiscal flexibility. The state comptroller also warned that the city’s budget reduced contingency reserves, including the general reserve, down to the $100 million statutory minimum.
New York remains one of the most economically powerful cities on earth. It still dominates finance, media, publishing, fashion, advertising, law, and international business. People continue to move there because it offers opportunities unavailable almost anywhere else. The city still attracts massive tourism, investment, and foreign capital. And despite all the horror stories, the overall tax base has not collapsed. Official projections still show growing tax revenue in coming years, although that may be offset by predictions of even faster growing expenditures.
This is because wealthy people are often less mobile than politicians and cable news hosts imagine. Moving is not just a tax decision—it involves business networks, schools, family ties, social status, office locations, cultural institutions, and personal identity. A hedge fund manager may enjoy saving millions on taxes in Miami, but he may also discover that his entire professional ecosystem still functions in Manhattan.
In other words, it turns out that civilization is annoyingly sticky. But, with each arrival of a new millionaire or business in a Southern state, a small part of that missing social infrastructure is re-established, making it easier for the next hedge fund manager to set up shop.
Still, New York faces a genuine long-term risk, and it is not necessarily the dramatic overnight collapse people imagine. The real danger is something slower and far more bureaucratic: a gradual erosion of the tax base combined with increasingly optimistic government spending.
This is where economics stops being exciting and becomes terrifying.
Suppose Mamdani inevitably announces yet another new “tax the rich” proposal that is anticipated to raise $500 million annually. Headlines celebrate. Advocacy groups cheer. Editorial boards declare that fairness has finally arrived.
Then reality intervenes.
More wealthy residents leave. Others restructure income. Investments are delayed. Real estate transactions slow. Businesses expand elsewhere. Capital gains are realized in different states. Accountants suddenly become the most powerful people in America.
Instead of raising $500 million, the tax brings in $300 million. Unfortunately, by this point the government has already spent the imaginary $500 million three times over and created six new agencies to administer it.
Now there is a budget gap.
The response, naturally, is to propose another tax, and triggering even more capital flight.
The core problem for New York is concentration. A tiny percentage of taxpayers provide an enormous share of tax revenue. Millionaires account for a massive portion of New York’s income tax collections. This means the city’s financial health increasingly depends on the continued willingness of a relatively small number of highly mobile people to remain exactly where they are and continue earning exactly as much money as before.
That is not a stable long-term strategy. It resembles balancing the city budget atop a stack of champagne glasses.
And yet, the political incentives always favor more taxation because the immediate math looks irresistible. If one billionaire pays millions annually in taxes, then taxing him a little more appears painless. Multiply that across thousands of wealthy taxpayers and politicians see visions of balanced budgets dancing in their heads.
The trouble is that economists are forced to deal with the horrifying reality that human beings react to incentives.
Raise cigarette taxes and fewer people smoke. Raise gasoline prices and people drive less. Raise taxes on capital and wealth, and eventually some capital and wealth relocate.
This should not be controversial, but somehow every generation of politicians acts shocked when it happens.
The final irony is that if New York ever truly succeeded in driving out large numbers of wealthy taxpayers, the burden would not vanish into thin air. It would simply shift downward onto the remaining middle class, homeowners, renters, and businesses. By the time officials realized the rich did not produce the projected tax revenue after all, the spending commitments would already exist.
And then a new politician would arise with a fresh PowerPoint presentation explaining why one more tax increase will finally solve everything forever.
At which point the last remaining taxpayer in Manhattan will quietly board a flight to Miami carrying nothing but a laptop, a residency affidavit, and a deep appreciation for palm trees.
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