“Half of my Massachusetts clients over the last five years have either left or are planning to leave,” Karger says. That represents “billions of dollars in net worth and hundreds of millions of dollars in annual income.”

He — and other experts I’ve talked with — note that Massachusetts faces stiff competition from other states for tax dollars. Such moves could profoundly impact funding for schools, infrastructure, social services, and charities. And it’s part of a growing discussion about the state’s competitiveness as a place to do business, build companies, and raise a family.

Karger lives in Boston, and he’s an unabashed booster of the state: “We’ve got the best private schools. We’ve got the best public schools. We’ve got hospitals. The city of Boston is the most beautiful city in America. It’s the safest big city in America.”

But he notes that wealthy people tend to be particularly mobile. And many of his clients are “straddling,” he says. “They bought nice homes in the Bocas or the Palm Beaches or the Miamis and are starting to plan.”

Much of this planning began in late 2022, when the “millionaires tax” was approved in Massachusetts. The new law imposed an additional 4 percent tax on income over a million dollars. Since the state tax rate is 5 percent, that means that income over a million dollars would be taxed at 9 percent.

This applies not only to people who make more than a million dollars a year (the threshold for 2025 is $1,083,150), but also to someone who, in a given year, sells a $1.5 million house, even though they might only make $100,000 in salary.

And the tax comes on top of already-strict rules around wealth in Massachusetts: The estate tax is one of the heftiest in the country, kicking in for any estate worth more than $2 million. Only Oregon and Rhode Island have lower thresholds. In New York — another Democratic stronghold — the estate tax kicks in at $7.35 million. In California, there is no estate tax (though California is starting to face its own exodus of wealthy residents as it considers a wealth tax for billionaires).

New Hampshire, Karger says, has seen a large influx of wealthy folks from Massachusetts. “We have clients [who] have had homes up there and are moving up there.” And the shift to New Hampshire is part of a broader trend among Massachusetts residents: In 2024, more than 20,000 relocated up north. Meanwhile, Florida absorbed nearly 22,000 Massachusetts residents.

And that has ripple effects, Karger says. “Charity is a big, big problem. All of these nonprofits here, I see it firsthand. My clients, all of a sudden, they leave and they wind down their commitments to Children’s [Hospital] and to MGH and to the smaller local nonprofits.” Karger says he’s “very scared of this continued wallet drain.”

He understands why it might make sense to “tax the rich. They’ve made so much money.” But he notes that the rich can easily say: “Tax me all you want. I’m out.” He says he hopes “we don’t destroy the best city and best state in America. … I really hope we can figure this out.”

Florida-based entrepreneur Craig Welch, who founded a series of financial tech companies and used to live in Massachusetts, argues that “when the entrepreneurs leave, lots of other jobs leave too … I’ve started my third company in Florida, and there are right now 25, 30 employees that would’ve been in Massachusetts, and they are not going to be.”

Welch says the business landscape — including the approach to taxes — was better under Bill Weld, who was governor for much of the 1990s. But since the millionaires tax went into effect, he says, “I know four people who have left the state… And what all of them have said to me is: It’s not the tax. It’s the fact that Massachusetts is making it clear that they don’t want VCs and entrepreneurs in the state.”

Like Welch, Boston-based venture capitalist Antonio Rodriguez has witnessed an exodus of wealthy people, particularly amongst those who fund companies. Much of the exodus started during the pandemic, he argues: “When we all had our heads in the sand, government did a bunch of dumb things.”

Rodriguez, a managing partner at Matrix, believes that the millionaires tax was passed without “a really organized debate about whether it made sense in terms of innovation in Massachusetts.” People assumed that the “golden goose” — the dynamic Massachusetts ecosystem — would continue to offer up “golden eggs,” he says. “ As opposed to taking care of the goose before it dies from malnutrition.”

At the same time, companies allowed more employees to work remotely, and many workers scattered. Last year, a Massachusetts Business Roundtable report showed that more than 85 percent of midsize-to-large employers surveyed had staff affiliated with Massachusetts operations who worked remotely. And that number has only risen since 2023, despite a raft of back-to-office headlines.

Rodriguez says many of his fellow investors left, too. Younger venture capitalists “moved away because of [a] lack of deal volume,” he said. Some in the prime of their career also left, despite Rodriguez’s belief that Massachusetts is a great place to raise kids. (He cites New York City and San Francisco as places where VCs have moved.)

“The thing that scares me now,” Rodriguez says, “is that we’re in this natural period where the Silicon Valley machine is spinning really quickly with Anthropic and OpenAI and Cursor and all of these AI companies that are there. And instead of seeing some of that diffusion come back here, which would’ve been typical of prior waves, there’s no one back here to pick it up because everyone’s leaving or has left.”

In 2025, Welch, the entrepreneur, lost a high-profile court case after Massachusetts claimed he had undeclared income from the state. Welch — who lived in New Hampshire at the time — sold his $4.7 million share in a Massachusetts company he had founded about 20 years earlier. Welch argued that the shares were not awarded as income; at the time he received them, they had essentially no value. The Department of Revenue prevailed.

An investor who relocated to Florida told Rodriguez that “Massachusetts just feels ‘grabby’ for the first time.”

When it comes to tech and innovation, he says, “these geographic questions are about flywheels that start spinning. And you get enough people of a certain type, and the flywheel spins. And it’s easier for that next person to come and stay here. I think that the best thing you can have as a city or a state is a flywheel that’s unique to some source of intellectual capital or talent that is spinning really quickly.” (See the rise of biotech locally.)

He says when those flywheels “slow down — or God forbid, stop spinning altogether — then the difference between here and Milwaukee — not to pick on Milwaukee — is much less than people think.”

The question of whether the millionaires tax has been successful is controversial. The Institute for Policy Studies points to the fact that between 2022 and 2024, Massachusetts households with at least $50 million increased by more than 25 percent (from about 2,000 to about 2,600).

But during those years, the stock market also skyrocketed. It’s possible that lots of wealthy people took their tax dollars to other states, but a batch of new residents joined the $50-million-plus club. Now, the question is: What will happen to those people, their tax dollars, and the jobs they create?

Massachusetts faces a harsh reality: It isn’t about what’s fair. Without any national push to raise taxes on the wealthy, it’s a race to the bottom among states. And in order to impose its vision of fairness, our state may ultimately pay a very high price.

“Massachusetts thinks [the new tax has] been a big tailwind, and it’s got a couple billion dollars of collected revenue,” says Karger. “That’s shortsighted. They’re going to need that, because people are leaving.”

Kara Miller is the host of the podcast It Turns Out. Send comments to kara.miller@globe.com.