WASHINGTON (TNND) — Several states have increased taxes on high-income earners in recent years, aiming to raise more revenue for public services like education, transportation, and childcare. But the moves have sparked a broader debate over whether these policies come with unintended economic consequences — including the potential loss of wealthy residents and taxable income.
A closer look shows that while these states are increasing taxes on high earners, they are not implementing true “wealth taxes,” which would directly tax a person’s total net worth.
States including Massachusetts, California, New York, Washington, and New Jersey have all raised taxes on high-income residents, commonly known as a “millionaires tax,” through a combination of surtaxes and higher top tax rates.
A surtax is an additional tax applied on top of existing income taxes, typically targeting earnings above a certain threshold. Higher top tax rates increase the maximum percentage applied to income in the highest tax bracket.
Experts note that these policies focus on income, not wealth.
A true wealth tax would apply to a person’s total net worth — including assets such as real estate, stocks, and business holdings — even if those assets are not sold. No U.S. state currently has a broad-based wealth tax in place.
Supporters of higher taxes on top earners argue the policies are working as intended: generating significant revenue from the highest-income households.
In some cases, states have collected billions of dollars through these tax changes, helping fund public programs and services.
However, critics point to data they say shows declines in Adjusted Gross Income (AGI) — a measure of taxable income — in several states following tax increases.
NEWARK, NEW JERSEY – DECEMBER 07: (L-R) New Jersey Governor-elect Mikie Sherrill greets the audience before a conversation between Stephen Colbert & Conan O’Brien to benefit Montclair Film at New Jersey Performing Arts Center on December 07, 2025 in Newark, New Jersey. (Photo by Michael Loccisano/Getty Images)
California and New York have reported billions of dollars in net AGI losses in certain periods, according to the data cited by critics.
Washington and New Jersey have also implemented higher taxes on top earners, including Washington’s capital gains excise tax and New Jersey’s top income tax rate on million-dollar earners, along with additional taxes on luxury property sales. Both states have reported mixed results, with strong revenue in some years but concerns about income and resident outflows in others.
Critics argue some high-income residents may be relocating to lower-tax states such as Florida and Texas.
Supporters say higher taxes on the wealthy are necessary to fund essential public services, including schools, infrastructure, transportation, and childcare programs. They argue these policies help address income inequality while strengthening state budgets.
Critics counter that higher tax burdens on top earners can have unintended consequences, including the loss of residents, investment, and taxable income.
Economists also caution that taxes are only one factor influencing relocation decisions. Housing costs, remote work opportunities, retirement trends, and overall cost of living also play significant roles in where people choose to live.
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