Why is that? Why is that little island so jam-packed with rich people?
Well, for starters, New York is the financial capital of the Western Hemisphere. A ton of money flows in and out of that place every day. And rich financiers (and their rich lawyers, and their rich doctors, etc.) tend to congregate together. Makes sense, doesn't it?
But what about the tax climate in the Big Apple? (There's a nickname you don't see too much anymore.) Does it favor millionaires and billionaires? Hardly. According to a front page story in the Times today, New York City has the second-highest marginal tax rate in the country, at 51.7 percent. If anything, those confiscatory rates should be driving people out of the city, shouldn't they?
And that's what the rest of the article is actually about (my emphasis):
It is getting awfully expensive to be a millionaire in California.
With the new year, big earners are confronting a 51.9 percent federal-state income tax hit on earnings over $1 million, the result of a confluence of new tax-the-rich levies imposed by California and Congress in the closing days of 2012. That is officially the highest in the nation. And at 13.3 percent, the top-tier California income tax is, in addition to being higher than any other state, the steepest it has been since World War II.
Though no one expects traffic jams at 30,000 feet as panicked millionaires make for the state line, the wealthy are once again grumbling about abandoning California for less punishing tax climates. Phil Mickelson, the golfer who collects purses in excess of $1 million, suggested that he might become the latest in a line of athletes and entertainment figures, among them Tiger Woods, who left California for states like Florida, which has no personal income tax.
“It’s definitely the highest in the United States,” said David Kline, a vice president of the California Taxpayers Association, a taxpayers’ advocacy organization. “What we like to point out to people is that there are states with absolutely no personal income tax — so if you moved from California to Florida, and you are in a high-income bracket, you are automatically giving yourself a 13.3 percent raise.”
Cristobal Young, an assistant professor of sociology with the Center on Poverty and Inequality at Stanford, conducted a study last fall that concluded that tax rates had little effect on where millionaires choose to live.
But Bradley R. Schiller, a professor of economics at the University of Nevada, Reno, said the argument that high taxes were not pushing people defied the obvious. The French actor Gerard Depardieu recently left his home country to avoid what he described as a severe increase in income taxes, drawing criticism from France and his fellow citizens. Accordingly, Mr. Schiller said, high-profile millionaires are unlikely to want to draw attention to decisions to leave for states with lower taxes, thus making the migration harder to track.
“Taxes have to be a very important of the equation,” Mr. Schiller said. “If you are talking about an income tax of 13 percent on a millionaire in California and an income tax rate of zero percent on a millionaire in Nevada, to argue that it doesn’t affect a millionaire’s locations decision is to say all millionaires must be stupid.”
If Mr. Schiller is right, then there must be an awfully lot of stupid millionaires in New York City.