During a recent Joint Legislative Hearing on the 2025 Executive Budget Proposal, New York lawmakers engaged in a critical discussion regarding the implications of the proposed extension of the ultramillionaire tax. This proposal, which seeks to maintain increased tax rates for high-income earners for an additional five years, has raised concerns about the ongoing trend of outmigration among wealthy residents.

A key point raised during the hearing was the significant reliance of New York's personal income tax revenue on a small percentage of taxpayers. It was noted that nearly half of the state's income tax receipts come from just 2% of its taxpayers, specifically those earning over $1 million annually. The discussion highlighted a notable fluctuation in the number of these high-income earners, with a peak observed in 2021 due to a surge in capital gains. However, this number saw a decline in 2022, with only a slight increase in 2023, bringing the total to approximately 86,000 income millionaires.

The testimony underscored the economic factors influencing this demographic's behavior, particularly the variability of income derived from capital gains compared to wage income. This variability contributes to the outmigration trend, as many high-income individuals are reportedly relocating to states like Florida and Texas, drawn by factors such as lower taxes and favorable climates.

The hearing revealed that New York is experiencing a net outmigration of residents across all income levels, with data indicating that more people are leaving the state than moving in. This trend poses significant challenges for the state's economy and tax revenue, raising questions about the sustainability of the ultramillionaire tax in the face of potential further declines in the tax base.

As lawmakers continue to deliberate on the budget proposal, the implications of these discussions will be closely monitored, particularly regarding how tax policy may influence the state's ability to retain its wealthiest residents and maintain essential public services. The outcome of these discussions could have lasting effects on New York's economic landscape and its fiscal health in the coming years.