Wealthy New Yorkers’ exodus cost the state billions last year — will the trend continue?
Eric Adams pledges to bring New Yorkers back from Florida, but Wall Street expresses concern and may take tax dollars elsewhere
As we reported, New Yorkers have been fleeing for Florida in droves. In total, for the 2019-April 2021 period, 104,960 New Yorkers made the switch — far and away leading every other state and exceeding past averages.
Although there is a silver lining, with New York reporting a (modest) growth trend in the past decade, many of those who left were the ultra-wealthy, replaced with lower-income residents taking their place.
As Reuters first reported, a net 70,000 people left the metropolitan region in 2020, resulting in roughly $34 billion in lost income, according to estimates from Unacast, a location analytics company.
Eric Adams, the NYC Democratic mayoral nominee (and likely next Mayor given NYC’s outsized Democratic voting population), recently made ending this exodus a centerpiece of his campaign, vowing that “New York will no longer be anti-business” at September 13th’s SALT conference (a who’s who gathering of money managers and business titans).
As the presumed next Mayor pointed out, many of those who moved were “among the 65,000 New Yorkers who pay 51% of our income tax.” The top 1% of New Yorkers reported a combined $133.3 billion in income in 2018, according to the city’s Independent Budget Office. They paid $4.9 billion in local income taxes, making up 42.5% of total income tax collected by the city.
‘Bring your butt back to New York.’
Even Eric Adams is leaving NYC for Florida — but it’s to bring the wealthy New Yorkers back. “On Jan. 2, 2022,” he said, “I’m taking a flight to Florida, and I’m telling all those New Yorkers that live in Florida—I’m telling them, ‘Bring your butt back to New York.’”
Yet with Florida having no personal income tax, and NYC having the highest in the nation (14.8% for the highest earners with city and state taxes), Eric Adams may have a tall order, according to The Partnership for NYC, which represents nearly 300 of the city’s largest businesses.
“The city’s financial services industry is responsible for 35 percent of New York City’s business tax collections,” Katheryn Wylde, the group’s president, told the Post.
“The financial industry is the biggest contributor to the New York economy and tax rolls and Wall Street is looking for new leaders to respect that contribution,” Wylde said. “Most business leaders want to be in New York, but will leave if the political environment remains hostile or the quality of life deteriorates.”
The highest individual tax contributors and businesses will set up offices in more tax-friendly states (aka Florida) if the trend continues, the partnership’s executive committee said – which includes JPMorgan CEO Jamie Dimon, BlackRock CEO Larry Fink, Citigroup CEO Jane Fraser, and Blackstone CEO Steve Schwarzman
Will NYC’s coffers survive a continued wealth exodus?
NYC’s short-term budget outlook surprisingly became more positive after the pandemic peaked, according to State Comptroller Thomas P. DiNapoli. It was largely “buoyed by more than $15 billion in federal relief” along with a 40.6% increase in local sales tax collections.
However, the city’s total collections have yet to return to pre-pandemic levels. And the Comptroller acknowledges that “behavioral changes related to increases in state income or corporate tax rates, which push the city’s combined income and corporate tax rates to the highest rates in the country, would widen the budget gaps.”
Arguably, the data and trends already show behavioral changes with the flee to Florida. Furthermore, “despite historic federal relief, the plan would still leave the city with significant budget gaps in FY 2023 through FY 2025,” DiNapoli says.
The swap of wealth for lower-income residents may have saved NYC from becoming a ghost town, but it bled money from the world’s financial capital, and if it continues, the city’s economic woes from the pandemic may become the “new normal.”
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