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Noonan’s Notes Blog is written by a team of Hodgson Russ tax attorneys led by the blog’s namesake, Tim Noonan. Noonan’s Notes Blog regularly provides analysis of and commentary on developments in the world of New York and multistate tax law. Noonan's Notes Blog is a winner of CreditDonkey's Best Tax Blogs Award 2017.


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A Blue Wave of High Tax Rates?

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As residents and SALT practitioners in New York, we see firsthand how high income tax rates drive the personal decision making of taxpayers as well as enforcement efforts by tax departments. On the taxpayer side, we’ve seen tangible (albeit anecdotal) evidence that taxpayers will make decisions on where to work or live based on their taxes. We saw this in 2018 with the explosion of moves following the implementation of the SALT cap, and again in New York in 2021 when, combined with Covid, taxpayers exited New York at a record-breaking pace, coincidentally around the time that the New York legislature raised the highest combined tax rate for New York State and City resident taxpayers to 14.7%. Of course, over the years New York has become somewhat of a leader in personal income tax enforcement, particularly in the residency area, to address the movement of taxpayers both in and out of the state. For example, over the course of 2018 through 2022, the tax department reports performing over four thousand residency audits per year. More recently, the tax department has put in place a massive “desk audit” program specifically to have a process that immediately questions taxpayers who left the state in 2020 or 2021.

As practitioners who specialize in the SALT personal income tax area, we’ve never seen that kind of volume in other states, in part because people come and go from New York probably a lot more than they do other states. But part of it has to be that there’s a reason people come and go—or more appropriately go—having to do with the high tax cost us New Yorkers have to pay for living and working in the state. Indeed, other than California, no state comes all that close to the 14.7% that New York City residents have to pay at the highest tax rates in New York.

But is that changing? Two years ago, Washington – a state with no personal income tax – passed a special 7% tax on taxpayers with capital gains income.[1]  That tax is presently still pending, due to litigation, but was a surprising move by a state that never had personal income tax.[2]  And just this past October, Massachusetts voters approved a constitutional amendment imposing additional 4% tax on taxpayers with income over $1 million, that starting in 2023 will bring the Massachusetts tax rate to 9%.[3]  This has already led to us getting a number of calls for advice on getting out of Massachusetts. Not to be outdone, California, a state that already boasts one of the highest top income tax rates in the country (13.3%), put a proposition to impose an additional 1.75% tax on taxpayers with personal income of over $2 million a year on the ballot this past November.[4]  Lucky for taxpayers in the Golden State, voters rejected the measure that would have given California the highest income tax rate in the United States. In 2021, Washington D.C. raised their top personal income tax bracket to 10.75%, joining the cohort of blue states (or district in their case) to increase taxes on taxpayers with over income over $1 million.[5]  

Will other states follow suit?  If we just think about general trends, the likelihood that a state like Florida or Texas either votes to impose an income tax or legislates to do so seems highly unlikely. But with 52% of Massachusetts voters approving the rate hike, will other states see this as an opportunity to do the same? What about Connecticut with its 7% rate, clearly now in outlier when compared to New Jersey (10.75%), New York, and Massachusetts.  How about Pennsylvania (only 3%) and in its newly-minted democratic governor? Or states like Virginia (5.75%), Michigan (4.25%) and Nevada (0%)?  Could these arguably blue (or purple) states follow Massachusetts lead? And if they do will there be any room in Florida for former residents of these states?

Only time will tell, and maybe 2023 isn’t the year for it, as we already seem to be in the next election cycle for 2024. It will be interesting to keep an eye on Massachusetts-like developments in various states over the coming years or so.

[1] Capital Gains Tax, Washington State Department of Revenue, available at:

[2] The State of Washington has appealed the ruling to the Washington Supreme Court. While the appeal is pending, the Department of Revenue will continue to provide guidance to the public regarding the tax as a courtesy. See

[3] Kate Dore, Massachusetts voters approve ‘millionaire tax.’ What it means for the wealthy, CNBC (Nov. 10, 2022). Available at:

[4] California Proposition 30, Tax on Income Above $2 Million for Zero-Emissions Vehicles and Wildfire Prevention Initiative (2022). Available at:,_Tax_on_Income_Above_$2_Million_for_Zero-Emissions_Vehicles_and_Wildfire_Prevention_Initiative_(2022).

[5] Jared Walczak, D.C.’s Income Tax Hike Helps Maryland and Virginia, Not D.C., The Tax Foundation (July 26, 2021). Available at:

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