Top earners in New York City—one of the biggest billionaire enclaves in the world—are reportedly on track to pay the highest combined local tax rate in the country as part of a new budget deal among state lawmakers that would raise corporate and income taxes by $4.3 billion annually, the Wall Street Journal reported Sunday.
The state’s top lawmakers briefed legislators on a plan Saturday that would raise the state income tax to 9.65% from 8.82% for individuals making more than $1 million annually and joint filers making more than $2 million, the WSJ reported, citing unnamed people familiar with the matter.
Tacked on to New York City’s top income tax rate of 3.88%, individuals making more than $1 million would pay at least 13.53% in state and local taxes, surpassing California’s top income tax rate (also for individuals making more than $1 million per year) of 13.3%, which has been the nation’s highest since 2012.
According to the WSJ, the plan would also create two new tax brackets for individuals making more than $5 million annually, taxing such income at a marginal rate of 10.3% until it hits $25 million, after which the rate jumps to 10.9%.
That means the highest income tax rate in New York City would be nearly 14.7%—more than double the top rate in all but 10 states.
The New York Department of Taxation and Finance and representatives for New York Gov. Andrew Cuomo (D) did not immediately respond to Forbes’ request for comment Sunday.
What To Watch For
New York lawmakers are racing to iron out the final details on their annual state budget, which faced a March 31 deadline. “We have alerted the Governor and the state Legislature that if a state budget is not adopted on Monday, about 39,000 state workers may have a delay in receiving their paychecks,” State Comptroller Tom DiNapoli said Thursday. A final bill is expected to be passed early this week, according to the WSJ.
92. That’s how many billionaires called New York City home in March 2020, more than any other city in the world for the sixth year in a row, according to Forbes.
New York City’s top 1% of earners reported a total of $133.3 billion in income in 2018, according to a report released by the city in October. It’s unclear how many taxpayers earned at least $1 million.
Millionaires, billionaires and corporations have long flocked to high-tax states like California despite the financial allure of tax havens like Florida, Nevada and Texas. A 2012 study found that only about 150 high earners in California (less than 0.04% of its total high earners) left the state in the two years after it raised its top rate to 13.3%. The tide, however, may be changing. After California lawmakers proposed a wealth tax of 0.4% on residents worth at least $30 million, billionaire investor Jeffrey Gundlach blasted the state and threatened to leave. “Elon Musk, Joe Rogan and Ben Shapiro, to name just a few, are leaving California to escape incompetent governance,” Gundlach tweeted. “The ‘response’ from Sacramento? Wealth and massive income tax increases on job creators… Should I align with 3 smart guys, or Sacramento? Hmmm.” Musk, Rogan and Shapiro all moved from the state in the past year, and though they cited other reasons for their departures, the moves are sure to save the lot millions of dollars in taxes annually.