The 'Mamdani Effect' in New York: Can the City Afford a Millionaire Tax?

Bayonne New Jersey - April 24, 2023: View of the Statue of Liberty and the Empire State Building with the late afternoon light shining down.

(Image credit: Getty Images)

Wherever you live, how large a tax increase would you tolerate before you would consider leaving for another state?

That’s where things stand for some people right now in New York.

Starting in 2026, the state’s top 5% income earners will be subject to a temporary personal income tax on top of the state’s general income tax. It’s hefty, too — the tax is 10.9% for incomes over $25 million. The measure will sunset in 2032.

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Beyond that, Mayor-elect Zohran Mamdani proposes to hike the city’s top tax rate from 3.9% to 5.9%. If approved, combined with the state rates, the income of New York City’s wealthiest would be subject to a tax of almost 17%, the highest in the country.

Mamdani’s plans for the millionaire’s tax revenue have been described by some as ambitious.

Mamdani has said that the tax would underwrite free city bus transportation, provide free childcare for residents with children from six weeks to 5 years old, freeze rents on rent-stabilized apartments, and create city-owned grocery stores.

After Mamdani announced his plan, New York City’s wealthiest did not react well, which raises a vital question: Will New York's elite stay and help pay for these programs through their tax dollars, or will they vote with their feet and move their millions out of the state?

New York tax increase: Voting with their feet?

Wealthy New Yorkers have reportedly had a lot to say about Mamdani’s proposed so-called "millionaire’s tax," and what would happen if his initiative were successful.

For example, Billionaire John Catsimatidis, owner of a Manhattan-based grocery store chain, told The Free Press that he’d “consider closing our supermarkets and selling the business.”

Neil Blumenthal, the co-founder and co-CEO of eyewear company Warby Parker, told reporters, "I will never move from New York, but there’s a lot of other people that will and are leaving New York."

Andrew Cuomo, New York’s former governor and Mamdani’s political rival, joked before the election that if Mamdani’s proposal became law, "even I will move to Florida."

But an exodus isn’t inconceivable. The top 1% of New York City’s taxpayers reportedly pay over 40% of the city’s income taxes.

To put things in perspective, however, it helps to look at another high-tax state: California.

Is the New York tax climate different from California’s?

About ten years ago, California voters approved Proposition 55, a measure that imposed a millionaire’s tax on the state’s highest earners through 2030. In 2022, the California Center for Jobs and the Economy, a policy organization, reported that the state lost $1.7 billion in revenue that year due to the migration of high-income households.

The loss reflects the ongoing trend of state revenue losses since Proposition 55 was approved in 2016.
Since then, California has experienced a net loss of $16.1 billion in adjusted gross income (AGI).

Raising steep taxes on the wealthiest state residents might cause some to flee. But many studies and reports have concluded that tax flight is a myth.

Michael Mazerov of the Center for Budget and Policy Priorities said the data doesn’t "support claims that much interstate migration is driven by high-income people — or anyone else — consciously choosing low-tax locations."

Mazerov noted that data from the U.S. Census Bureau and IRS data on interstate migration and academic studies show that what prompts Americans to relocate interstate is chiefly jobs, cheaper housing, and climate, and not taxes.

Other studies suggest further reasons high-earning households may be reluctant to move for several tax reasons.

Some may be prominent community leaders or have high-paying jobs for which they can’t easily relocate.
Family considerations, like a spouse who may have difficulty finding a satisfactory job in a new location, or that has children whose lives the parents don’t want to disrupt, or
Long-standing social ties, including generational and intergenerational family relationships.

One difference between California and New York City may be the latter’s status as a wealth hub, "constantly replenishing the ranks of millionaires and billionaires, more than making up for the rich who move out," according to a CNBC report. As of July 2025, there are "over 33,000 New Yorkers worth $30 million or more."

In New York, the feared flight of the rich — the so-called "Mamdani effect" — has yet to materialize.

Local realtors report that sales of luxury homes $4 million and above in November were up by double-digit percentages from October. Rents for Manhattan (the city’s most expensive borough) apartments have also soared.

According to a Corcoran Realty Group broker, even if Mamdani’s tax is implemented, wealthy residents’ flight "isn’t going to happen overnight. People don’t flee the city simply because the taxes are gonna go up two percent."

Much ado about nothing?

Given the sturm and drang over the millionaire’s tax, it may be good for wealthy New Yorkers to keep in mind that the tax may never go into effect.

NYC can’t raise a tax on its own; the state legislature has to authorize it. While Mamdani appears to have allies in both state houses, including Assembly Speaker Carl Heastie and Senate Majority Leader Andrea Stewart, Democratic Gov. Kathy Hochul looks to be the key player.

Though some pundits say there could be wiggle room when it comes to corporate taxes, Hochul is on record as saying she is staunchly opposed to raising personal income taxes and would likely veto any legislation that does so.

"I don’t want to lose any more people to Palm Beach," she said.

Roxanne Bland, a self-styled “tax nerd,” has worked in the tax field for over 30 years as a state tax legal analyst. Before joining Kiplinger as a tax writer to help ordinary people make sense of their federal and state tax obligations, Roxanne spent many years covering developments in state tax jurisprudence at the U.S. Supreme Court and worked closely with state revenue agencies to develop uniform tax legislation. She has also contributed to Tax Notes State, a Tax Analysts publication focusing on cutting-edge corporate tax issues.