Massachusetts Tax Hike Leads to Income Exodus, Raising Concerns for New York

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A new 4% surtax on income above $1 million in Massachusetts has led to a net outflow of $4.2 billion in adjusted gross income from the state in 2023, an 8% increase from the prior year. This shift occurred despite overall migration patterns remaining relatively stable, suggesting high-earners are leaving to avoid the higher tax burden. Experts warn a similar dynamic could play out in New York if a proposed estate tax expansion, lowering the threshold to $750,000, is implemented.

Why it matters

The Massachusetts example highlights how targeted tax increases, even on the wealthy, can lead to an erosion of the tax base as people and income relocate to more favorable jurisdictions. This is a particular concern for New York, which already has one of the highest tax burdens in the country and has been experiencing population outflows to lower-tax states for years.

The details

In 2023, the first year the Massachusetts surtax took effect, the state experienced a net outflow of $4.2 billion in adjusted gross income, an 8% increase from the prior year. This shift occurred despite overall migration patterns remaining relatively stable, suggesting high-earners are leaving to avoid the higher tax burden. Experts warn a similar dynamic could play out in New York if a proposed estate tax expansion, lowering the threshold to $750,000, is implemented. This would impact a much broader group of residents than just the ultra-wealthy, potentially driving more people and income out of the state.

• The Massachusetts surtax took effect in 2023.
• The New York estate tax proposal has been put forward by Assemblyman Zohran Mamdani.

What they’re saying

What’s next

The New York state legislature will consider Mamdani's estate tax proposal, and experts will be watching to see if it leads to a similar exodus of income and residents as seen in Massachusetts.