The thing about wealthy people in 2025, is that they’re more mobile than they have ever been. With Zohran Mamdani heading toward what appears to be a future mayoralty of New York City, the assumption is that taxes in the city will go up. And when they do, the city’s wealthiest could flee, forcing what Allysia Finley of The Wall Street Journal calls a “tax-hike death spiral.” She writes:

Mr. Mamdani would need state approval to raise income taxes in the city, and Gov. Hochul has been cagey about whether she would go along with his proposal to impose a 2% surcharge on income over $1 million. That would raise the top rate to 16.8%, by far the highest in the country.

A tax hike looks to be inevitable as long as Democrats control Albany. Some Democratic legislators are admitting as much, though they are trying to deflect political blame to Republicans in Washington. By their telling, federal spending “cuts” to Medicaid will soon leave them no choice but to hike taxes. In truth, federal Medicaid spending continues to grow.

The GOP tax bill this summer merely ended the all-you-can-eat Medicaid buffet for states. Democrats’ problem is that their insatiable spending appetite will always exceed the means to pay for it. Raising taxes only drives away the businesses and wealthy taxpayers governments need to finance their generous welfare states.

Consider California. After revenues plunged during the 2008-09 financial crisis, Democrats rallied voters in 2012 to approve a supposedly temporary tax hike, which added three new income-tax brackets and raised the top rate to 13.3% from 10.3%. Several years later, Democrats asked voters to extend the tax hikes through 2030, which they did.

A 2023 paper by Stanford economist Joshua Rauh found that out-migration by California high earners accelerated after the 2012 hike. Reported taxable income by wealthy denizens who didn’t leave also declined, perhaps because they used other means to shield their income from higher taxes or reduced their business activity in the state. The tax hikes thus raised 56% less revenue than expected.

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