A recent report from the Business Council of New York State presented a grim economic picture for the future of the state’s finance and insurance sectors, as high-income earners flee for more affordable jurisdictions such as Florida and Texas. The Business Council estimated that nearly three jobs are created in other sectors for each finance sector employee, so the economic impact is monumental.
Other sober realities: New York ranked 36th in the nation for economic growth, at two-tenths of 1%; New York witnessed the highest rate of population decline in the nation from 2019 to 2022, at 2.7% (mostly in high-earner suburbs and the city proper); the most significant flight of income, at $11 billion, was from Manhattan, with a net decline of $9.8 billion in city income shifting to Florida in 2021 alone; the Big Apple boasts the highest combined state and local income tax rate in the nation. The state also levies an estate tax.
Progressive State Failures
It may mystify progressives that wealthy taxpayers flee high tax jurisdictions, but that mist will dissipate rapidly as the damage done to America’s large liberal cities grows. California is suffering a comparable flight of wealth, chasing away the affluent taxpayers needed to fund ambitious social spending programs. For decades, people moved to California as the land of opportunity; now they seek greener pastures in Texas, Florida, and other areas where taxes and housing costs are substantially lower. (California Gov. Gavin Newsom has signed legislation that moves toward a massive reparations program. How many taxpayers will flee that costly initiative?) The Golden State has killed the golden goose, much as New York is doing.
The Public Policy Institute of California has concluded that “the state is no longer a significant draw for people from other states of any age, education or income,” noting that some 220,000 people left in 2021 alone. Many of these were high earners, which threatens the state’s economy: The top 1% pay nearly 50% of state income taxes; the top 10% cover 80%. Government wealth transfers through taxation prompt residents to transfer residency ASAP. California imposes the highest state tax in the country (13.3%), and the number one destination for departing Californians is Texas, where state income tax is zero.
New York and California share another unappealing feature: They embrace citizenship for illegal immigrants and invite low-taxpaying droves to settle in their territories. Newsom continues to pretend that the violence, homelessness, and poverty drowning his state are nonexistent, but New York City Mayor Eric Adams has declared a crisis as winter approaches, claiming some 200,000 new “asylum seekers” are expected in the next few months. The scourge of crime, panhandling, and suffering that sanctuary cities have brought upon their taxpaying residents is leading more and more of those who can afford it to seek asylum in states like Florida or Texas. New York City offers free airline tickets to migrants to leave the country and free tents on arrival. Adams claims 2,500-4,000 new migrants arrive every week seeking political asylum.
The flocks of newcomers may maintain New York City’s population, but they do not offset the lost revenues of the fleeing rich taxpayers. The Big Apple has implemented generous progressive spending in recent years, funded by new taxes on its wealthiest denizens. Democrats claim COVID caused New Yorkers to leave the city, but high taxes were pushing them out well before the pandemic. The state’s efforts to chase wealthy taxpayers for revenue after they relocated are the stuff of regulatory legend.
New York Budget Blues
It is understandable that as wealthy taxpayers exit a jurisdiction, they take their banking and investment service businesses, too. Some finance firms and insurers will likely relocate to other states, to follow the monied class (their clients). New York thus stands to lose both its tax base and its business foundation in one fell swoop, as taxpayers and businesses seek economic breathing room in less oppressive locales. Meanwhile, hundreds of thousands of homeless immigrants are expected to land on New York streets this winter alone, while lax (progressive) criminal policies fuel crime and inflation devour real incomes for all New Yorkers.
To service the state’s sagging budget, progressives will likely call for yet another millionaires’ tax. That and increasing crime will spur more businesses and high-income earners to exit. Like a dragon eating its tail, New York is positioned for a vicious downward economic cycle. Progressives fiddle; Rome burns.