In 1975, at the height of New York City’s financial crisis, President Ford announced he would deny federal aid to help the city avoid bankruptcy. The Daily News ran an iconic headline the next day: “FORD TO CITY: DROP DEAD.”
Today the headline might read: “NEW YORK TO MILLIONAIRES: DROP DEAD.”
The latest example of New York’s politicians bitterly driving out millionaires — less than 1 percent of the state’s residents who pay about 40 percent of the state’s income taxes — is the family living at 1600 Pennsylvania Avenue in Washington, D.C., but who otherwise called New York City "home."
“Good riddance,” Democratic Gov. Andrew Cuomo said of Trump's move. “He’s all yours, Florida.” New York City Mayor Bill de Blasio, who is spending more time in the city after dropping out of the race for president, commented as well, saying, “Don’t let the door hit you on your way out.”
Cuomo signed a law allowing Congress to look at the president’s tax returns. De Blasio has threatened to cancel any city contract with the Trump Organization headquartered in New York City. Both actions are constitutionally dubious.
Trump, a native of Queens, is changing his primary residence to Palm Beach. Florida is one of seven states without an income tax (along with Alaska, Nevada, South Dakota, Texas, Washington and Wyoming). New York’s top marginal income tax rate is 8.82 percent, with New York City levying an additional 3.876 percent on income above $90,000 for joint filers.
President Trump tweeted, “I love New York, but New York can never be great again under the current leadership of Governor Andrew Cuomo…” The president went on to note that, “Taxes and energy costs are way too high, Upstate is being allowed to die as other nearby states frack & drill for Gold (oil) while reducing taxes & creating jobs by the thousands… Too many people are leaving our special New York.”
Indeed, IRS data for 2015-16 (the most recent period for which tax return data is available) showed 1,100 millionaires moved out of New York during the period, a 2.4 percent drop. Cuomo has blamed an unexpected $2.3 billion drop in revenue on wealthy taxpayers fleeing New York for other states.
According to the U.S. Census Bureau, between July 2017 and July 2018, New York lost an estimated net total of 48,510 residents — the worst rate in the nation.
That exodus of just over a thousand millionaires will likely turn into a flood in years ahead. The Tax Cuts and Jobs Act of 2017 that President Trump signed into law in December 2017 limited the individual deduction for state and local taxes (SALT) to $10,000 per filing household.
In 2016, the average New Yorker who itemized their deductions claimed a SALT deduction of $21,779. In 2017, that was capped at $10,000 and, while most taxpayers got a tax cut under the new tax law, the average New Yorker would see that cut eroded or, in a few cases, turn into a tax hike.
As Cuomo said last February about New York millionaires, “One percent pay nearly half of all those taxes. Those one percent are the richest people in the state. They're the richest people in the country, and they are the most mobile people in the country.”
In September, another famous New York resident, legendary investor Carl Icahn, announced he was leaving the Empire State for Florida. The move will likely save the 83-year-old millions in state and local taxes each year. Icahn is said to be offering his staff $50,000 in relocation benefits, with half of his staff taking him up on the offer.
It isn’t just Trump and Icahn. Other wealthy residents are also moving out. According to the U.S. Census Bureau, between July 2017 and July 2018, New York lost an estimated net total of 48,510 residents — the worst rate in the nation. From 2010 through July 2017, the state experienced a net domestic migration loss of more than 1 million people.
Despite Cuomo’s stated concern for millionaires — and their tax payments — leaving the state, earlier this year he signed into law a five-year extension of a “temporary” millionaire tax that was supposed to last three years when it was imposed a decade ago. The tax surcharge brings in about $4.5 billion annually, funding more than 4 percent of the state’s budget.
Wealthy New Yorkers who move, including Trump, aren’t quite in the clear yet. The state legislature considered and almost passed a new tax on nonresident owners of homes worth more than $5 million in New York City. The tax would raise $650 million a year and be earmarked for the city’s transit system.
New York’s political leadership is in a bind. Their tax-and-spend ways are driving out the productive people they desperately need to pay for big government. The day of budgetary reckoning will come.