'Another straw on the camel's back': RIAs weigh impact of Mamdani's NYC tax proposals

Zohran Mamdani’s proposed tax increases on wealthy New York City residents are being discussed by RIAs as they prepare for the Democratic socialist’s potential win in November. 

New York is home to more RIAs with $1 billion in client assets than any other state, according to a new study from SmartAsset.  Mamdani’s proposals include a so-called “millionaire tax” of an additional 2% tax on New York City residents earning more than $1 million a year. 

Given the city’s current top rate of 3.876%, the tax would bring the combined NYC and state tax to 16.776%, the highest in the country. The combined federal, state and city rate would be 53.776% for million-dollar earners.

“For most of the clients we've been speaking to, it's likely to increase their taxes, so what can they do to help mitigate some of that?” said William Connor, partner at the New York-based RIA Sax Wealth Advisors, which manages $2.4 billion in AUM per its latest form ADV. “The biggest beneficiary I'd say on the investment side is probably tax free New York bonds, because those become more attractive if this tax gets through.”

New York state had a net loss of $14 billion in net adjusted income due to taxpayers leaving between 2021 and 2022, according to the Tax Foundation and IRS data cited by CNBC. “I don’t want to lose any more people to Palm Beach,” New York Gov. Kathy Hochul said in July after being asked about Mamdani’s proposed tax hikes.

“There's a lot of folks who have left the city, whether that's for nearby areas or further afield, like Florida or Texas,” Connor told InvestmentNews. “There's certainly been a noticeable uptick in conversations around is this the right move for me. Folks who have wealth typically are pretty mobile and oftentimes have second homes.”

Family circumstances of those considering a move from New York, and the portability of their business and lifestyle are key discussion topics between clients and advisors at Settanni Financial, an RIA based in suburban Westchester. While states like Florida do not have their own estate tax, estates over $7.16 million are subject to tax in New York.

“We just had a call with a client, he’s in his 60s, he's retiring and wants to do estate planning, so he asks us what’s the cheapest way? So the first thing we tell them is, the cheapest way is to get out of New York,” said Don Settanni, president of his family-owned firm. “So what happens with this Mamdani thing, is it's another straw on the camel's back. You don't know if it's going to set the person off to make that decision, because we've become such a mobile society.”

Don’s son, chief financial officer David Settanni, added, “It's kind of my belief that the people that went to Florida left during COVID, and I don't know that I really would see a big wave of people leaving [again].” However, Mamdani’s primary win has prompted “some chatter that if people did leave the city, that the clients we have in the suburbs, it could actually be beneficial for them because of your real estate values if there's more demand in the suburbs,” David said.

Merit Financial Advisors, a $20 billion RIA with locations across the U.S., made its fifth acquisition in Florida last week by adding Second Half Financial Partners. To accommodate clients considering moves from the Northeast to Florida, Merit has invested in financial planning software to show how their taxes and estate planning would differ in various states. 

“Florida is one of our fastest growing states,” said Tyler Vernon, managing principal for the East Coast at Merit Financial Advisors. “You're seeing that people are leaving the northeast and coming down to Florida, mainly for tax reasons and cost of living reasons. What we have done is invest considerably in planning technology to help accommodate those type of decisions."