Will Taxing the Rich Really Make Them Flee?
Should NY & CA Tax the Rich? Data on Wealth Migration
If a state could solve its budget crisis by asking its wealthiest residents to pay a little more, should it? This question is at the center of a heated debate in America’s economic powerhouses, New York and California. As these states grapple with fiscal pressures in 2026, proposals for taxing the rich are gaining traction, sparking a familiar and fierce counter-argument: if you tax them, they will leave. But is this long-held belief grounded in reality, or is it a political myth?
This analysis will examine the data behind wealth migration, explore the economic arguments for and against higher taxes on top earners, and assess the political calculations facing governors like California’s Gavin Newsom and New York’s Kathy Hochul.
The 2026 Taxing Debate: A High-Stakes Political Standoff
The political landscape in 2026 has brought the issue of wealth inequality into sharp focus. In New York, progressive lawmakers are advocating for a new New York millionaire tax to fund public services like transportation and housing. Governor Kathy Hochul’s tax plan, however, has shown caution, reflecting concerns that raising taxes could drive high-net-worth individuals—and their significant tax contributions—to lower-tax states like Florida or Texas.
Similarly, in California, activists are pushing for a billionaire tax in California, a measure designed to capture a fraction of the immense wealth held by the state’s richest residents. Governor Gavin Newsom’s tax policy has historically balanced progressive ideals with a pro-business stance, making him hesitant to endorse a policy that critics claim could damage the state’s economic competitiveness. The central conflict is clear: progressives see an untapped revenue source to address social needs, while fiscal moderates and conservatives warn of a potential millionaire exodus that could leave the state worse off.
Following the Money: What Wealth Migration Data Actually Shows
The core of this debate hinges on whether millionaires and billionaires pack their bags when tax rates go up. While anecdotes of high-profile departures, like Elon Musk’s move from California to Texas, capture headlines, comprehensive studies suggest a different story.
Do Millionaires Leave High-Tax States? A Look at the Evidence
Recent research provides crucial insights into this question. A landmark study analyzing millions of tax records found that wealthy households are, in fact, less likely to move between states than lower-income households. The data suggests that for most affluent individuals, factors like business connections, family ties, and quality of life outweigh the appeal of a lower tax bill.
New York Case Study: A 2021 analysis by the Fiscal Policy Institute examined migration patterns after New York raised its top income tax rate. The study found no statistically significant increase in out-migration among the state’s top earners. Instead, the number of millionaires in New York continued to grow.
Massachusetts’ “Millionaire’s Tax”: In 2022, Massachusetts voters approved a surtax on income over $1 million. Opponents warned of a mass departure. However, a subsequent study by the People’s Policy Project found that the state collected billions in new revenue while the population of millionaires actually increased.
This wealth migration data indicates that while taxes are a consideration, they are rarely the primary driver for relocation among the wealthy.
The Economic Impact: Revenue Windfall or Growth Killer?
Beyond migration, the economic consequences of taxing the rich are a key point of contention. Proponents argue that higher taxes on top earners can generate substantial revenue for critical investments without harming the broader economy.
For example, a New York millionaire tax could generate billions annually, funds that could be directed toward upgrading public transit, improving schools, and addressing the housing crisis. In California, a proposed billionaire tax on unrealized capital gains could bring in an estimated $20-25 billion per year, providing a massive boost to the state budget. Advocates argue these investments create a positive feedback loop, improving the quality of life and economic opportunities for all residents, which in turn makes the state a more attractive place to live and work.
Counterarguments and Political Realities
Opponents of these tax hikes present several counterarguments. They contend that even a small number of departing billionaires can have an outsized impact on state tax revenue. California, for instance, relies heavily on its top 1% of earners for nearly half of its personal income tax revenue. Losing even a few of these taxpayers could create a significant budget hole.
Furthermore, critics argue that such taxes create a hostile business environment, discouraging investment and entrepreneurship. They point to the administrative complexity and potential legal challenges of implementing novel wealth taxes, which could lead to years of costly litigation. This perspective shapes the cautious approaches of both the Gavin Newsom tax policy and the Kathy Hochul tax plan, as both governors must weigh the promise of new revenue against the risk of spooking the very individuals who drive much of their states’ economic activity.
A Calculated Risk Worth Taking?
The evidence suggests that the threat of mass wealth flight is often overstated. While some high-earners may choose to relocate, the vast majority tend to stay put, anchored by deep personal and professional roots. For states like New York and California, the debate over taxing the rich is not just about fiscal policy; it is about defining their social priorities.
The decision to raise taxes on millionaires and billionaires is a calculated risk. However, data indicates it is a far smaller risk than opponents claim. By investing the resulting revenue in services that improve the quality of life for all, states may find that the best way to keep the rich is to create a society that everyone, regardless of income, is proud to call home.
Frequently Asked Questions (FAQ)
Do millionaires leave high-tax states?
While some do, studies show that the vast majority of millionaires do not move in response to tax increases. Factors like family, business networks, and quality of life are typically stronger drivers of relocation decisions.
How much revenue do millionaire taxes raise?
The amount varies, but it can be substantial. For example, Massachusetts’ “millionaire’s tax” has generated over $5 billion in its first two years. Proposed taxes in New York and California are projected to raise billions annually.
Which states have billionaire taxes?
Currently, no U.S. state has a specific “billionaire tax” on wealth or unrealized capital gains. However, several states, including California, have active proposals under consideration.
Does raising taxes hurt economic growth?
The relationship is complex and heavily debated. Opponents argue it discourages investment. Proponents contend that when the revenue is invested in public goods like infrastructure and education, it can stimulate long-term, equitable growth.
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Your analysis is defective, as it does not consider where the tax money goes. In California, which I left about 6 years ago, the tax money is "invested" in support mentally ill and drug-destroyed homeless. It also goes to shield illegal aliens. And, although governor Newsom would rather not, it goes to pay interest on debt.
High taxes were not the cause of me leaving. Rather, it was the high crime rate and the insane firearm laws.
Believe me, my quality of life here in northern Nevada is infinitely better. If I need California, it is ony a half hour to South Lake Tahoe. But so far, I find little reason to go there (I sold my sailboat).
. . . Richard