New York and other states are using AI to hunt down wealthy remote workers and demand more tax

• New York is using AI-generated letters to challenge remote workers moving to low-tax states.
• CNBC reported that AI is helping with staff shortages in New York's tax department.

New York is the millionaire capital of the world, but some of those who want to stay rich are fleeing to low-tax states like Florida and Texas.

The state tax department has a solution: AI letters.

It is sending hundreds of thousands of AI-generated letters, mostly to wealthy remote workers or those who require a change in tax residency, according to CNBC.

The letters could help beat staff shortages, although it's unclear if this is part of the reason they were implemented.

The state reported an increase in audits in 2022 but a decrease in auditors.

There were 771,000 audits in New York in 2022, according to a recent report by the state Department of Taxation and Finance cited by CNBC. That's a 56% increase from the previous year, the outlet said.

Meanwhile, the number of New York-based auditors declined by 5% to under 200 in the same year because of tight budgets, CNBC said.

Mark Klein, partner and chairman emeritus at Hodgson Russ LLP, told CNBC that the tax department is using sophisticated technology "to determine the best audit candidates," with a focus on wealthy individuals who have relocated from high-tax states to low-tax states, such as Florida or Texas.

"And guess what? When you're looking for revenue, it's not going to be the person making $10,000 a year. It's going to be the person making $10 million," he said.

New York City is home to 340,000 millionaires, 724 centi-millionaires, and 58 billionaires, making it the wealthiest city in the world, according to data by residence and citizenship investment firm Henley and Partners.

Tax departments across the US are using both human auditors and AI to examine cellphone records, which will help figure out where taxpayers are spending most of their time and subsequently where they owe taxes, Klein said.

"New York is being very aggressive," he said.

"The state says, 'Well, you didn't really move since all your TV and all your stuff is still in New York,'" Klein told the outer.

"They don't understand, the wealthy can buy more stuff for the Florida home. They can buy another TV."

The issue of location is not uncommon when it comes to taxes. Celebrities and millionaires around the world have gotten into trouble for filing in the wrong location, seemingly with the intent of paying less.

One notable example is Shakira, who in November was fined €24 million (around $26 million) over charges that she failed to pay €14.5 million (around $15 million) in Spanish income tax between 2012 and 2014.

During that period, Shakira listed her main residence as the Bahamas (where tax rates are lower) despite spending most of her time in Spain, according to prosecutors.

Shakira, who had consistently denied accusations of tax fraud, said at the time that she had chosen to "prioritize her career and stability and that of her children" by putting an end to the process and "thus avoiding the impact of media exposure and the trial time, which is often of an exhausting length."

New York's Department of Taxation and Finance did not immediately respond to a request for comment.