Property markets in the crosshairs
While higher taxes on the rich have long prompted warnings of a “millionaire exodus,” academic research suggests most high earners remain in place, anchored by careers, businesses, or family ties. Still, the very top tier of wealth—particularly mobile billionaires or owners of seasonal estates—may be more responsive to targeted levies.
Massachusetts’ experience illustrates the complexity. Voters approved a 4 percent surtax on annual incomes above $1 million in 2022, which has generated nearly $3 billion in the latest fiscal year, exceeding projections. Yet it is too early to know whether the state’s millionaire headcount is shrinking or whether strong markets, like Boston’s biotech sector, will outweigh any tax deterrent.
Other states are experimenting with different approaches. Rhode Island has enacted a “Taylor Swift tax” on vacation homes worth $1 million or more, set to take effect next summer. Connecticut legislators have floated higher income tax rates for top earners, while Washington has increased its capital gains tax. Maryland has approved steeper rates for residents earning over $500,000 a year. And in New York City, a leading mayoral candidate has proposed an additional levy on incomes over $1 million.
Winners, losers, and market shifts
An analysis of the potential real estate consequences across these states suggests uneven outcomes:
- Massachusetts – Urban hubs such as Boston and Cambridge are expected to remain resilient, but Nantucket and Martha’s Vineyard could face slower luxury sales.
- Rhode Island – Coastal second-home markets like Watch Hill may soften; properties just under the $1 million threshold could see more activity.
- Connecticut – High-end towns in Fairfield County may see gradual outflows of ultra-wealthy homeowners, but mid-tier commuter properties could benefit from increased turnover.
- Washington State – Seattle’s tech-driven demand may hold firm, though luxury waterfront properties and certain vacation areas could slow.
- Maryland – The D.C. suburbs remain anchored by government and professional employment, with only marginal impact expected at the high end.
- New York (NYC-linked) – If additional city taxes advance, Manhattan’s ultra-luxury market and Hamptons estates could face downward pressure, while outer-borough and rental-oriented properties remain stable.
Risk rankings for luxury real estate
Based on scope of tax change, exposure of vacation homes, dependency on ultra-luxury buyers, and wealth mobility sensitivity, the states rank as follows for vulnerability in high-end property markets:
