New York's wealthiest look for exits as state readies hefty tax increase

Key Points
  • The budget that was passed by state lawmakers in Albany and heading to Gov. Cuomo's desk for signature would likely have New York City's executives end up with combined local and state personal income tax rates that are higher than for wealthy California residents.
  • "Moving to Florida is an active and serious conversation with my peers," a media executive told CNBC. "If my kids weren't here I would move tomorrow."
A child looks back at a banner for Roblox, displayed to celebrate the company's IPO, on the front facade of the New York Stock Exchange (NYSE) in New York, March 10, 2021.
Brendan McDermid | Reuters

New York's top business leaders are gearing up for a potential mass exodus as Gov. Andrew Cuomo and state lawmakers prepare to raise their taxes.

With the state budget set to increase the personal income tax on the wealthiest New Yorkers as well as hiking corporate taxes, some executives who fled the city for Florida temporarily due to coronavirus pandemic lockdowns are considering permanent relocation, according to business leaders briefed on the matter.

Wealthy business leaders who have historically resisted moving at least some of their resources to Florida or other less-taxed states explained to CNBC that they are now seriously reconsidering as working from home becomes the norm, allowing more flexibility.

Tracy Maitland, president of investment advisory firm Advent Capital Management, said that while he still loves his home base, he's not ruling out departing.

"It's a consideration," Maitland told CNBC in an interview Wednesday. "I love New York and I was born and raised in New York. I'm going to do whatever I can to try to steady the ship. If I can't, then I'm going to have to make a decision," he added.

Florida does not tax personal income. Miami Mayor Francis Suarez told CNBC that he has been in touch with some of New York's biggest firms, including since details of the tax hikes were announced this week.

"We have been," Suarez said when asked if he's heard from New York-based business executives in recent days. "I can't give names but if you're looking to know if we're talking to the biggest firms in New York, we are."

"Clearly, the toxic climate in New York has led businesses to look to Miami as an attractive place for long-term expansion and relocation," Suarez said. He noted that he's received a "very receptive" response to his pitch to New York executives and pointed to moves by Blackstone and Starwood Capital into Miami. Blackstone recently signed an office lease in Miami while Starwood moved its headquarters to the city.

JetBlue, which is currently headquartered in Long Island City, New York, is looking at shifting some staff to Florida.

"We've hit a critical mass of interest and excitement in Miami and with these big players coming here, people are beginning to understand that this is very real," Suarez said.

In the budget passed by state lawmakers in Albany and heading to Cuomo's desk for signature, New York City's executives would likely see combined local and state personal income tax rates that are higher than those on wealthy California residents.

A spokesperson for Cuomo's office did not return a request for comment before publication.

Within the more than $200 billion state budget, the top tax rate gets bumped to 9.65% from 8.82% for single filers who make more than $1 million. Those who make between $5 million and $25 million would be taxed at around 10.3% and for those making more than $25 million the rate would be at 10.9%. Wealthy earners are expected to get hit with those new taxes in the next tax season, with the rates expiring in 2027.

As New York executives consider their future living options, the wealthy across the country are facing the threat of the federal corporate tax rate going up under President Joe Biden's administration. The president has said he wants to raise the corporate tax rate to 28% in order to pay for his infrastructure plan. Biden has said he's willing to negotiate on the corporate rate. New York business leaders seeking tax relief via the elimination of the cap on the state and local tax deduction (SALT) have lobbied Biden's advisors and Sen. Majority Leader Chuck Schumer, D-N.Y.

Those who declined to be named in this story did so in order to speak freely about ongoing private conversations.

A Wall Street executive who has had stints at investment firm Evercore and other similar offices told CNBC that a few friends who already reside in Palm Beach, Florida, are contemplating making it their permanent residence.

An executive at an investment firm noted he's "thinking about it" when asked whether he'd leave New York altogether.

A media executive who runs a massive public relations firm in New York explained that more than a dozen people he has spoken to are seriously considering leaving the state permanently with taxes for the rich on the rise.

"Moving to Florida is an active and serious conversation with my peers," this person said. "If my kids weren't here I would move tomorrow."

Other locales are also getting a look these days.

A corporate restructuring attorney said he's considering moving to Washington, D.C., believing he could save money on property taxes there. Property taxes in Washington are drastically less than they are in New York, according to a 2019 study by USA Today.

Kathryn Wylde, president and CEO of the Partnership for New York City, with hundreds of members who represent businesses across the city, told CNBC that business leaders are hearing from employees and potential recruits about the need to set up offices in states outside of New York in order for them to avoid paying higher tax rates.

"What I'm hearing is that those nonresident taxpayers are now demanding from employers that they set up an operation where they can be domiciled so that they don't have to pay some New York taxes," Wylde told CNBC in an interview. Wylde's group sent a letter to Cuomo and state Democratic leaders last month, encouraging them not to raise taxes. The letter did not appear to have much of an impact.

The partnership's executive committee includes JPMorgan CEO Jamie Dimon, BlackRock CEO Larry Fink, Citigroup CEO Jane Fraser and Blackstone CEO Steve Schwarzman.

Wylde pointed to a conversation she had with an asset manager, which she declined to name, who told her that a potential recruit refused to live in New York City due to the tax increases and this executive is now planning to open offices in Florida.

New York state law says that "if you are a nonresident, you are not liable for New York City personal income tax."

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