Will Mamdani’s Proposed Millionaire Tax Save Or Sink New York City? PART 2

Key Concepts

• New York City Income Tax
• Flat Tax
• Progressive Tax
• Millionaire Tax / Surtax
• Massachusetts Fair Share Amendment
• Adjusted Gross Income (AGI)
• Wealth Migration

New York City Income Tax Proposal

Mamani proposes that the current New York City income tax functions essentially as a flat tax at a rate of 3.9%. This is supported by his statement on his website, Mam Dani, where he claims, "Whether you make $50,000 or $5 million, you pay practically the same tax rate."

Proposed Progressive Tax Structure

Under Mamani's plan, a surtax would be implemented. This surtax would be an additional 2% applied to incomes exceeding $1 million, thereby making the tax system more progressive.

Supporting Evidence: Massachusetts Millionaire Tax

Mamani cites the example of Massachusetts' millionaire tax as evidence that his plan can be effective. In November 2022, Massachusetts voters approved the "fair share amendment," which introduced a 4% surtax on personal income above $1 million.

Financial Impact of Massachusetts Fair Share Amendment

• Revenue Generated: The tax generated $1.8 billion in its first three quarters of collection.
• Funding Allocation: These revenues are designated to fund school lunches, transportation, and education.

Addressing Concerns of Wealth Migration in Massachusetts

• Initial Fears: There were concerns that the tax might lead ultra-wealthy residents to leave the state.
• Observed Migration Patterns: While Massachusetts did experience an outflow of residents in 2021 (the year the bill passed), the majority were upper middle-class taxpayers, not millionaires.
• Historical Context: This observation aligns with historical data indicating that Massachusetts has been losing individuals across all income levels since 2009, with a more pronounced loss among middle and high-income earners.
• Potential Drivers of Migration: Rising housing costs in Massachusetts, coupled with lower housing costs in other states and the availability of remote work opportunities, may have contributed to the departure of middle-class residents.

Data on Millionaire Population in Massachusetts

• IRS Data Analysis: An analysis of data from the IRS's Statistics of Income program revealed a 36% increase in tax returns reporting an adjusted gross income (AGI) of $1 million or more in Massachusetts between 2018 and 2022.
• Wealth X Data: Wealth data from Wealth X indicated a 38.6% rise in the number of millionaires in Massachusetts between 2022 and 2024.

Conclusion

The transcript presents an argument for a more progressive tax system in New York City, drawing parallels with the implementation and observed effects of a millionaire tax in Massachusetts. The Massachusetts case study suggests that while concerns about wealth migration exist, data indicates an increase in the millionaire population and revenue generation for public services, with broader migration patterns potentially driven by factors beyond just taxation.

Reported by Kieran Meadows from Forbes.