Rich Fleeing High-Tax States Story Does Not Hold Up, Per Fortune
The millionaires are not leaving
The story that the rich are fleeing high-tax states does not hold up in the IRS data, according to a Fiscal Policy Institute analysis covered by Fortune.
The states with the most progressive tax systems, including California, Connecticut, Massachusetts, New Jersey, and New York, plus Washington, D.C., have the highest concentration of millionaires per filer in the country, and their millionaire populations have grown since 2010.
Fiscal Policy Institute executive director Emily Eisner told Fortune that millionaire households simply are not that sensitive to state tax rates because the taxes are not really high enough for them to be sensitive to them.
What happened when New York and California raised rates
New York raised its rate on incomes over 1 million dollars in 2021, and its millionaire count jumped 21 percent that year to 84,366, while the number who left the state fell to 1,453 from nearly 2,000 the year before. The state count had already risen from 57,126 in 2016 to 68,068 in 2019, and New York's millionaire share rose again in 2023, the most recent year available, while Florida saw a decline in its share that year.
California raised its top rate to 13.3 percent in 2012 after critics warned the rich would leave. About 138 people left as a result, which is 0.04 percent of the 312,000 people hit by the tax, according to a Stanford-led study cited in the coverage.
Eisner said the burden lands hardest not on millionaires but on families earning between 100,000 and 500,000 dollars a year, who feel squeezed in expensive cities even while earning well above national norms. New York's share of the nation's total millionaires has still slipped, because other states are adding millionaires faster.
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How this could hit the options market
If high earners stay, state tax base fears fade, and that matters for municipal bonds, regional banks, and housing exposed to New York and California wealth.
Watch MUB, KRE, XLF, and XLRE for flow if new wealth tax proposals advance on the back of this data.
The options angle is policy risk repricing. A credible no-flight narrative makes future top-rate hikes more politically viable, which keeps a tail risk alive for high income state exposed names.
Track the flow as it hits the tape and Sign up for Unusual Whales to stay ahead of the next move.