Mamdani's Tax Fantasy Is Already Failing Somewhere Else
Submitted by QTR's Fringe Finance
Last week I wrote that Zohran Mamdani is a f***ing moron has proposed a new estate tax that is not really aimed at billionaires but at ordinary New Yorkers whose so called wealth is largely tied up in the homes they spent decades paying off.
That argument may have sounded abstract to some readers, like a warning about unintended consequences that might or might not materialize. But we do not have to speculate about how these kinds of burdensome taxation policies play out. Other than the Laffer Curve, which exists for a reason and has existed for 50 years now, we have another real world example, and it is happening in a state that shares many of New York’s political instincts and fiscal habits.
Massachusetts recently implemented a new 4% surtax on income above one million dollars after voters approved the measure in 2022. Supporters framed it as a targeted, reasonable way to raise revenue from top earners in order to fund public priorities like education and transportation. In theory, it was precisely the kind of policy that politicians like Mamdani claim will generate large sums of money without broader economic consequences.
But, of course, the early data tells a more complicated and far less comforting story.
In 2023, the first year the surtax took effect, Massachusetts experienced a net outflow of $4.2 billion in adjusted gross income. That number increased eight percent from the prior year. This was not driven by a sudden collapse in population or some unrelated shock. It reflects a steady and measurable movement of income and the people who earn it out of the state. Even more telling is that this shift occurred despite the fact that overall migration patterns did not dramatically worsen. In other words, fewer people may have left, but those who did leave took significantly more income with them.
Chart: Bloomberg
This is the dynamic that advocates of higher taxes on so called targeted groups consistently ignore. Taxes change behavior, particularly among people with the greatest flexibility to respond.
High earners, business owners, and investors do not passively absorb higher tax burdens if they have realistic alternatives. They look for jurisdictions that treat them more favorably, and in the United States those alternatives are abundant. States like Florida and New Hampshire offer dramatically lower tax burdens and have become magnets for precisely the kind of taxpayers that high tax states increasingly depend on.
Supporters of the Massachusetts surtax will point out that it has generated billions in new revenue, and that claim is accurate as far as it goes. What it leaves out is the longer term erosion of the tax base that can accompany those gains. When billions of dollars in income leave a state, that loss compounds over time through reduced investment, fewer business formations, and lower future tax collections. The short term revenue boost can obscure a slower but more consequential decline underneath.
Now consider what Mamdani is proposing in New York. His plan rests on the same magical thinking that drove the Massachusetts surtax, namely that the government can squeeze significantly more revenue out of a conveniently defined group without that group noticing or doing anything about it. This is a comforting theory if you spend most of your time in policy seminars and very little time observing how actual humans behave.
In the real world, people respond to incentives, especially when those incentives involve large sums of money and the option to simply leave. New York, of course, is already one of the most heavily taxed places in the country and has been bleeding residents to lower tax states for years. Piling on a dramatically more aggressive estate tax is not bold policy innovation. It is doubling down on a problem everyone can already see.
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What makes Mamdani’s proposal even more impressive, and by that I mean in the worst possible way, is how wide a net it casts while still pretending to target only the rich. Massachusetts at least aimed its surtax at income above one million dollars, which, while debatable policy, is at least rhetorically consistent. Mamdani wants to drop the estate tax threshold to $750,000, which in New York City is less a marker of wealth than a marker of having bought a house at some point in the last thirty years and not lost it. A modest home in Queens or Brooklyn plus a retirement account is enough to trip that wire. Apparently, in this framework, a retired city worker with a paid off house now qualifies as landed gentry. The rhetoric says oligarchs. The math says your parents.
The behavioral response here does not require a PhD in tax law to understand, which is perhaps why it gets so little attention from the people proposing it. Avoiding an estate tax is not like restructuring a business or navigating some obscure loophole. In many cases, it is as simple as changing your address. That is not a hypothetical. Retirees already move to states with lower taxes all the time. Mamdani’s plan just gives them one more very concrete reason to do it, preferably before the state gets a final look at their life savings. It turns out that when the choice is between leaving New York or handing over a large chunk of what you planned to pass on to your children, a nontrivial number of people will start browsing real estate in Florida.
The predictable result is then treated as some kind of mystery. Instead of a stable and growing stream of revenue extracted from the rich, you get a slow but steady erosion of the tax base as wealth, income, and taxpayers relocate to friendlier jurisdictions. That loss does not show up all at once, which makes it easy for policymakers to ignore in the short term while they celebrate the initial revenue bump. Over time, though, the math stops cooperating, and the response is almost always the same. If the rich are not paying enough, the definition of rich quietly expands until it includes whoever is still around.
New York does not need a crystal ball to see how this plays out. The preview is already running in places like Massachusetts. Ignoring it is not bold or visionary. It is just willful blindness. And if Mamdani’s proposal moves forward, the ending will not be surprising. It will be the same story New York has been telling for years, only faster, louder, and far more expensive for the people who do not have the option to leave.
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