What is a city when its richest people are gone?

The buying spree comes as California is considering a wealth tax to impose a one-time retroactive levy on billionaires, fueling speculation they have linked it to the Golden State. In New York City, where Mayor Zohran Mamdani earlier this month proposed increasing taxes on people with higher incomes — and even lower ones, a property tax There is discussion of growth-parallel migration.

The wealthy have long threatened to quit as they clash with local governments over taxes. In the past, they rarely did this. But this time their threats have substance – not because they’re abandoning great cities, but because they’ve discovered they don’t have to. Now that digital technology allows them to separate their place of residence and pay tax from where their business operates, they are not shifting their companies. They are transferring themselves.

It overturns the basic mechanisms that underpin great cities – what they are, how they work and who pays for them. An existential question looms amid this seismic shift: Can those cities survive without them?

For most of history, people lived where they worked – on the farm, above the shop, close to the factory. Suburbanization expanded the scope, but workers, managers, and executives still had to live close to where jobs were concentrated. Because people had to live there, cities could charge a premium. Residents pay for it in housing costs, taxes and commuting costs or other hassles of day-to-day life. The alternative – living elsewhere – means being cut off from their livelihoods and economic opportunities. Taxes were part of that price, and people paid because they had no choice.

When Covid arrived, this social compact appeared to be shaken. A group of commentators predicted the imminent collapse of New York, London, San Francisco and other great global cities. He predicted that the rich and their companies would be decimated by lockdowns, governance failures, crime and the sudden possibility of remote work. As a result, cities will become hollow.

At first it seemed like there was something in it. Ken Griffin moved himself and the headquarters of his Citadel hedge fund from Chicago to Miami. Venture capitalists Peter Thiel and Keith Rabois purchased homes in Miami Beach and also opened an office for their venture capital fund in Miami. Jeff Bezos is gone from seattle to miamiAssembling a compound worth over $200 million.

But the projected total migration was never fully realized.

Many of those who immediately moved to Miami faced its limitations. Government and private schools could not match what he left behind. Housing costs increased drastically, making Miami now one of the most inaccessible markets in the country.

Most seriously, they found it difficult to recruit top talent. New York and London remained the centers of global finance. San Francisco remains a center of high technology, with the bulk of venture capital investment in AI startups still flowing into the Bay Area.

In 2023, Thiel accepted so muchRecognizing that the tech industry is densely concentrated in California and Miami’s housing costs have put the city out of reach for the talent it needs – making it more difficult for companies and their people to relocate than they initially thought. Griffin himself built a huge new building in new york Even Citadel expanded into Miami.

But eventually they realized they didn’t need to move their companies at all. Digital technology enabled them to live in one place and run their business in another. They can establish residence in Miami, with no requirement to spend any specific time there to claim residency status, and can spend most of the year wherever they want – flying into New York or San Francisco for all that matters. The city where their businesses are headquartered became just that – not a place where they were required to reside and pay taxes.

This has changed the underlying economic logic of cities. They are no longer self-contained economic units. Digital technologies are turning them into networks – physical spaces connected by virtual relationships and dynamic talent flows.

Economic participation now takes place across locations, not within them. My own research has documented the rise of what I call lifestyle tax havens – cities like Miami, Dubai and Singapore that combine warm weather, luxury amenities and easy access to global networks with low or no income taxes.

These lifestyle tax havens do not replace great centres. They are satellites in their orbit, part of the network built around them. Miami is an important node in New York’s financial network. Austin serves as a satellite of San Francisco’s technology network. Dubai plays a similar role to London and the financial centers of Europe and Asia.

Billionaires grab the headlines, but the same math applies higher up the economic ladder. For a high-earning individual, moving to Miami from San Francisco, Los Angeles or New York could save 10 to 14 percentage points on income taxes, depending on current rates. For a professional couple earning $1 million per year, that’s about $100,000 to $140,000 annually – which adds up to more than $1 million in a decade. Of course, this is a simplification—of course, taxes can be complex due to write-offs and different types of income. But income tax rates paint a clearer picture.

But what about cities that are lifestyle tax havens?

These were never built on a large scale like the older cities. In the old urban system, people were anchored at different places. That anchoring did more than generate tax revenue. It generated loyalty, civic investment, and philanthropy—long-term commitments that created private schools, museums, hospitals, universities, and cultural institutions. When people stopped they fixed what was broken because they had no choice.

Lifestyle tax havens often lack the civic commitment that allows places like New York, London, Paris or Chicago to grow into fuller-spectrum cities. Places like Miami lack integrated infrastructure and public systems, and as population and activity grow, everyday urban functions become increasingly difficult to manage. It becomes difficult to move around. Housing costs rise rapidly. Schools and public services struggle to keep pace. These are not temporary growing pains. Those are structural limitations.

This model works well enough for wealthy residents who can afford private solutions – housing, education, transportation, security. For empty stomaches and young professionals without kids, the compromise may be manageable. For families, they are far more consequential. And for service workers – people who staff hospitals, schools, restaurants and local government – ​​the barriers are often insurmountable. When the people who run a city cannot afford to live there, the city automatically begins to collapse.

This is the dynamic that economist Albert Hirschman warned about: It is that loyalty that turns frustration into voice – the impulse to fix what is broken rather than run away. Today, exhaust is cheap and reversible. When taxes rise or services disappoint, the response is not to push for reform but to move forward.

Then, cities are pushed into a race to the bottom – driven not by ideology, but by mobility. As higher earners leave the tax base without leaving the economy, cities face pressure to reduce taxes without reducing liabilities. The burden of funding schools, transit, parks, and public safety falls on those who remain. Established cities and rising stars alike have fallen into this trap.

Cities can’t chase mobile residents simply by cutting taxes. That’s a losing game. National governments are unlikely to solve this problem, and in any case it plays out on a global scale. Cities themselves will have to respond by rethinking the taxes they impose. If income and wealth can increase, cities should focus on those that cannot: land and property, consumption and entertainment, visitors and tourism, travelers and employment, promoting locally operated companies and locally established institutions.

For decades, large cities benefited from a relatively captive tax base. That barrier has now weakened—and in many cases, it has been broken. Cities can respond to this new competition, or they can choose not to do so. But they can’t get out of it.