Key Takeaways:
New York Mayor Zohran Mamdani's agenda invokes Sweden as a model for progressive governance — but Sweden itself abandoned the very taxes his policies would expand.
New York's debate over Mayor Zohran Mamdani's economic agenda treats capitalism and a strong safety net as rivals, but Sweden — the model his allies cite — has no wealth tax, no inheritance tax and a 20.6% corporate rate.
"Stockholm scrapped its wealth tax two decades ago precisely because it was driving capital and entrepreneurs abroad," Adam Lipson, a New York-based reader, wrote in a Wall Street Journal opinion piece published Thursday.
The disconnect comes as the latest IRS migration data shows the 10 counties with the largest net losses of taxpayers are all in California and New York. Los Angeles County alone lost 17,496 tax filers who took nearly $1.9 billion in adjusted gross income with them. Queens County, the Bronx, Orange County, California, and Suffolk County, New York, each lost close to $1 billion in income, according to the IRS data compiled from federal tax returns.
New York already relies on a narrow base where a small share of high earners generates an outsized share of city revenue. Policies that push those earners elsewhere don't merely cost the city revenue — they shrink the base that funds the programs Mamdani wants to expand.
The migration pattern extends well beyond New York. California's remaining counties in the top 10 — San Diego, Riverside and San Bernardino — each posted significant net taxpayer losses. The destinations gaining those filers tell a clear story: Maricopa County, Arizona; Harris County, Texas; King County, Washington; and Clark County, Nevada led the nation in net gains of interstate tax filers.
"It's very, very clear that people ultimately vote with their feet and when they feel like they're getting taxed too much, they go somewhere else where they will be taxed less," E.J. Antoni, chief economist at the Heritage Foundation, said. "If you look at where these people are going, they're not going to Massachusetts or Illinois or California. They're going to Texas. They're going to Tennessee. They're going to Florida — places with low or no income taxes and low overall levels of taxation."
The trend carries long-term fiscal consequences for states that continue losing affluent taxpayers. Paul Teller, a conservative strategist who served in the Trump-Pence White House, said the migration patterns should serve as a warning for policymakers. "What baffles me, especially as a former New Yorker, is that there doesn't seem to be a lot of concern in the states that are losing people," Teller said.
Manhattan attracted the nation's most new tax filers between 2022 and 2023, yet still saw a sharp decline in reported income as wealthy residents left, the IRS data show. The dynamic mirrors what Sweden experienced before it eliminated its wealth tax in 2007 — capital outflows that eroded the tax base rather than expanded it.
Mamdani, who took office in January, has advanced an agenda that includes higher taxes on top earners, rent freezes for stabilized apartments, free city buses and city-owned grocery stores. He recently opted out of New York City's campaign matching funds program, which would have imposed an $8 million spending limit on his reelection bid, citing the need to compete against well-funded opposition. The mayor raised about $304,000 from nearly 6,000 donors for his 2029 reelection campaign, according to a filing with the city's Campaign Finance Board.
California, which maintains one of the nation's highest top marginal income tax rates, has remained at the center of similar debates. Gabriela von zur Muehlen, chief policy officer at the Texas Association of Businesses, said high-tax states like California and New York are pushing wealth, jobs and investment toward Texas.
"Compassion and growth aren't opposing values," Lipson wrote. "But a city that forgets which one pays for the other will eventually have neither."
This article is for informational purposes only and does not constitute investment advice.
