New federal tax laws have recently been approved, and it’s causing a lot of buzz around already highly taxed states like New York. In terms of the new laws, income tax filers are capped at $10,000 for deductions of state and local taxes on their returns.
As of 2017, New York’s personal income tax rate ranges from 4% to 8.82%. With the new tax law, though, New Yorkers could see a jump from 8.5% to 13%. Those who make more than $10 million will see a potential tax hike of 50% or more, according to an analysis done by conservative economists Arthur Laffer and Stephen Moore.
Laffer and Moore stated in an op-ed in the Wall Street Journal that more than 800,000 people will move out of New York and California (facing similar tax laws) over the next three years.
“In years to come, millions of people, thousands of businesses and tens of billions of dollars of net income will flee high-tax blue states for low-tax red states,” they said.
The economists also predict that some 500,000 people will leave Connecticut, New Jersey, and Minnesota over the same three year time period. They say that 3.5 million Americans on net have moved from the highest-tax states to the lowest-tax states. They also note that it’s the high earners that have cost the states the most by leaving.
Cristobal Young, economist and sociologist at Stanford, calls these predictions “pure nonsense.” He stated that California, New York, and New Jersey have been high-taxed states for decades, and they still have the highest per capita concentration of wealthy people in the country.
“There is no correlation between the top tax state tax rate and the number (or rate) of millionaires in a state,” he said.
He also insisted that the individuals who will be most affected by the new tax law are “late-career working rich” and are less likely to relocate because they are “embedded in place for a host of social and economic reasons.” These reasons include the location of their companies, social lives, charitable boards, and customers or clients.