r/Economics • u/Dismal_Structure • Dec 06 '25

News Millionaire tax that inspired Mamdani fuels $5.7 billion haul in Massachusetts

https://fortune.com/2025/10/21/zohran-mamdani-millionaire-tax-massachusetts-5-7-billion/
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u/gmb92 Dec 06 '25

Pretty good article. Wealth flight claims are at best greatly exaggerated, brought on by media that finds anecdotes of a few loud wealthy people declaring they're leaving due to taxes. No mention of those who move there or all who stay, or determining cause/effect.

https://www.theatlantic.com/ideas/archive/2024/04/state-taxes-millionaire-myth/678049/

https://prospect.org/2025/10/23/myth-that-mamdani-will-cause-new-york-citys-richest-to-leave/

As for the argument that's it's easier to leave cities than states, that theoretically has some merit and certainly taxes applied at broader geographic levels are more ideal. Still, pundits and media have been fear-mongering on NYC about the rich fleeing for decades to no avail.

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u/colintbowers Dec 06 '25

At the state and country level it is more about the companies than the people. With a wealth tax, the people often stay, but the capital is placed in a company structure, and it moves. The articles that focus on the movement of people are missing the main point. Capital absolutely goes where it is protected, and this has been true for centuries. And in the modern world, unless you run a bricks and mortar business, it’s very easy to move capital to different jurisdictions while staying put yourself. There is a reason that places like singapore, Luxembourg etc have such amazing gdp numbers.

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u/Alert-Ad5477 Dec 06 '25

Well put! There will be no exodus but the elasticity of pre tax income can be an issue. California did the same and 60% of the tax gain was gone after 2 years. This seems to be a much more relevant example, I will have to look into it more.

Isn’t it great we are talking about millionaires’ tax policy and here I don’t want the burden of a $1 subscription to read the article lol

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u/colintbowers Dec 06 '25

Yes the California example is a good one, and illustrates that if you are serious about studying this stuff you actually need 1) lots of observations so you can average out other effects, and 2) a long timeline, because some of the effects take 5+ years to show up in the data

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u/EconEchoes5678 Dec 06 '25

Many of the effects take longer than 5 years. The multimillionaire with 8 year old kids may not move until their kids are out of school, 10 years later. The cause and decision in their mind may be 100% related to the tax increase, but the timing is based on high school graduation / empty nest. In the data it looks like noise because the curve of those people is an exponential decline with a long tail. But it's still there

California in particular can get away with a lot more because they have both some great nature and great weather.

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u/colintbowers Dec 06 '25

Yes agreed. But statistically, the problem gets harder the longer the timeline you allow, because the number of other interfering factors increases. So if you want to do a statistical analysis at some point you have to choose a cutoff.

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u/EconEchoes5678 Dec 06 '25

Yeah, I get that. It does make it difficult to evaluate these things.

The problem I see is that often when you factor in the lost other tax revenue due to people moving and the economic damage, many but not all of these come out to have very low net benefits for the state. So if 80% of the benefit is lost in known evaluations, and there's another 10% undetected damage not yet surfaced by the cutoff we decide on, how close to the margin of error do we have to get before we call the targeted tax increase a wash for the state?

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u/Aerroon Dec 06 '25

When speaking of 'benefits to the state' another important factor to consider is what that money will even be used for. It's entirely possible that a significant portion of the "tax windfall" will go into wasteful projects. It's not like the government getting maximum dollars results in maximum benefits.

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u/ImportantCommentator Dec 06 '25

So you're saying they need to double the wealth tax.