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Tax Tactics and Wealth Defense
States Float Exit Taxes as Millionaires Flee
Blue states are weighing exit taxes to stop millionaire migration, but the threat may accelerate wealth flight. Here’s how investors can position for the shift.
By Peter Christensen
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High-tax states are facing an uncomfortable truth: their wealthiest residents are leaving, and they are taking tax revenue with them. According to Goldman Sachs data, migration of high earners from New York, California, and Massachusetts to low-tax states like Florida and Texas has accelerated sharply.
Now, some blue states are floating a controversial response: an exit tax on departing residents. New York lawmakers have held hearings on the idea, and Massachusetts legislators have discussed similar measures. Proposals vary, but the concept is to tax unrealized gains or impose a levy when residents move their domicile.
The problem is precedent. In Crandall v. Nevada (1868), the Supreme Court struck down a state law that penalized residents for leaving. Thereby, it established a constitutional barrier to such taxes. But legal gray areas remain, in particular regarding taxing accrued gains while residents still live in the state. This means investors are facing both uncertainty and opportunity.
Why Exit Taxes Matter
The Starter Pistol for Capital Flight
If passed, exit taxes could backfire by acting as a starter pistol, accelerating the very wealth flight they are meant to prevent. Affluent households may expedite relocations to lock in low-tax domiciles before laws take effect.
Florida has already seen a 150% surge in filings from taxpayers with incomes over $1 million since 2016, while New York and California have logged some of the sharpest declines. The resulting revenue hit for these states is as high as 3% annually. That migration means more demand for housing, services, and financial advice in Florida, Texas, and other low-tax havens.
The Fiscal Squeeze on Blue States
A disproportionate share of state revenues comes from high earners. The top 1% of New York taxpayers account for more than 40% of income tax collections. If even a fraction leaves, budget pressures will quickly mount and force either spending cuts or higher taxes on those who remain. That dynamic can weigh on municipal bonds tied to states or cities that are already facing fiscal stress.
Wealth Management Shake-Up
When wealthy households move, they bring their financial relationships. Firms that can help clients navigate domicile changes, residency rules, and new estate-planning structures are well-positioned to grow. At the same time, compliance tech companies that track location data for tax purposes may see a new wave of demand.
The Finance Play on Capital Flight
Blue states are floating exit taxes, but the move risks accelerating millionaire migration to Florida, Texas, and other low-tax havens. The smart play isn’t betting on the tax itself but on the states and sectors set to gain from capital flight. Click below and learn more about each of the ETFs providing exposure to the winners from this trend:
Bottom Line
Exit taxes may accelerate millionaire migration, not stop it. The best positioning is to own ETFs tied to Texas growth (TEXN), residential REITs (REZ), and fiscally strong munis (TFI, MUB). Broad real estate (IYR) offers liquidity but with diluted exposure. The clear winners are the states and sectors absorbing the wealth.
This website shares our opinions and commentary on markets, commodities, and other assets. We may receive financial compensation to include certain featured companies/services/etc. in this website. Such financial compensation may impact the placement, but it does not impact on our critical analysis. The opinions, analysis, and commentary contained in the website are not financial advice. Market data mentioned here may be delayed and is not real-time. Investments involve risk including the risk of loss of some, or all, of your investment, and may not be suitable for all readers. While we make a good faith effort to provide you with unbiased professional opinions, please don’t make investment decisions based solely on this content — always do your own research or talk to a qualified advisor before making any investment decisions. We’re not responsible for any actions you take based on what you read here.
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