New York City has long been the financial heart of the state, but decades of unwise government policy are sending it into cardiac arrest.
High levels of taxing and spending are causing the Empire State to hemorrhage not just people, but businesses too.
A recent report from the Bureau of Labor Statistics shows more firms moving out of New York than any other state.
For those thinking about the state’s future, looking for jobs, or hoping their kids will find one and remain here, it’s a depressing thought.
Yet to New Yorkers who have labored for years under high taxes, it’s no surprise.
People have been fleeing the state for years, with residents from New York City leading the charge.
And as business owners leave, they frequently take their businesses with them and hang their shingles at their new destination.
Fewer businesses means fewer jobs and reduced tax revenue for the crumbling Empire State.
In 2021, that exodus meant New York lost 487 more single-location businesses to other states than it gained.
True, that number might not sound like a lot in a state with hundreds of thousands of companies.
But it’s a key measure, compared to the rest of the nation and to prior years: Indeed, it was the worst such loss of any state in at least three decades.
Many states were gaining firms as New York lost them.
And to be clear, that number doesn’t include all the businesses New York lost in 2021 — that figure’s far worse.
Companies and chain stores that simply closed aren’t counted.
Nor are businesses that shut their New York headquarters.
When they are counted, the figures explode.
During the pandemic, from the beginning of 2020 through the end of 2021, Manhattan alone lost over 5,000 businesses.
In 2022, after COVID waned, New York state had the third-worst rate of business growth in the country.
During that time, average weekly wages fell a whopping 9.4% in New York City.
Adjusting for inflation, that’s a real loss of 15.9%, compared to a 2.9% loss in real weekly wages nationwide.
Don’t think the trend started with the pandemic; New York has suffered a net loss of businesses to other states every year since 1994.
What’s been causing the bleeding?
Failed public policy, especially high taxes, most of all.
In 2021, following another state income tax hike, I projected the number of residents moving to other states would accelerate.
It has.
From July 2021 to July 2022, 300,000 more people moved out of New York than moved in.
It’s not just income taxes causing the pain.
Per the Heritage Foundation, New York has the highest total tax burden in the country and the second-worst overall business climate, along with the fourth-highest property taxes and local sales tax rate, on average.
And despite all that revenue, $118 billion in 2021, New York still managed to rack up the country’s highest state and local debt per capita.
It would be one thing if all that government spending had made New York the envy of the world, but it has been more like bloodletting instead — slowly draining the patient while claiming the “treatment” of more taxes and spending will restore health.
Meanwhile, low-tax Florida had the highest net in-migration of businesses, more than twice the next state.
Idaho, another low-tax state, had the highest per-capita rate of net in-migration of businesses.
Conversely, New York’s per-capita rate of net business losses was a hefty 50% more than the second-worst state, Illinois.
Because the outflow of New York’s businesses is so closely tied to the exodus of people, we can reliably estimate that, in 2022, the Empire State lost another net 400 single-location businesses to other states and is on track to do so again this year.
New York City and the state at large are both hemorrhaging their most valuable assets — people and businesses — at an alarming rate.
Sure, the state’s crime surge and mediocre schools (lawmakers actually capped the allowable number of charter schools, which generally perform better), not to mention the weather, also send people scurrying.
But it doesn’t have to be this way. Reversing New York’s decades of poor governance and injudicious policies can halt the decline.
And at the top of the list of what needs attention are the state’s oppressive taxes and wasteful spending.
Elected officials need to stem the bleeding soon, while the heart still has blood to pump.
E.J. Antoni is a public finance economist at the Heritage Foundation and a senior fellow at the Committee to Unleash Prosperity.
