GOING GOING GONE: WHY ARE PEOPLE LEAVING NY?

By Mike Durant
State Director, National Federation of Independent Business (NFIB)

As a share of population, New York said goodbye to more residents in the last decade than any other state. According to a stunning new report by the Empire Center, a project by the Manhattan Research Institute, more than 1.6 million New Yorkers moved out of state between 2000 and 2010.

The research, based on data from the latest US Census, showed that for the second consecutive decade New York was the country's favorite place to leave. Moreover, the inflow of immigrants to New York, which has traditionally been strong enough to offset the loss of population, has fallen sharply as well. So, not only are more people leaving New York, but fewer are coming. Why?

The exodus is "the ultimate barometer of New York's attractiveness as a place to work, live and do business," said EJ McMahon, the report's author. "It's the ultimate indication that what we've been doing is wrong."

Indeed. And it explodes the notion that New York can retain its global prominence, or even its regional competitiveness, without making serious changes in public policy.

Consider data from the non-profit Tax Foundation. The organization ranks New York dead last in the country for its high taxes. And according to its research more than 1.5 million income taxpayers left the state between 2000 and 2008, the last year for which they have figures. They took with them nearly 3 million exemptions – most likely their dependent spouses and children – as well as $97 billion in adjusted gross income.

Think about that, ninety-seven billion in spendable, investable, taxable income. Gone. Much of it now circulates in the Florida economy where there is no income tax, and it is no doubt behind that state's explosive economic growth in recent years. In fact, according to the Tax Foundation, Florida is the leading destination for New York taxpayers. In the past ten years it has attracted more than a quarter million income tax filers, more than half a million of their children and spouses, and more than $16 billion in income.

But Florida isn't the only haven for New York tax refugees. From 2000 to 2008:

• Nearly 50,000 taxpayers left for Texas (no income tax);
  
  
  
• More than 110,000 moved to Pennsylvania (60 percent lower income tax);
  
  
  
• Eighty five thousand went to North Carolina (lower income and corporate taxes);
  
  
  
• The list goes on, and in almost every case taxpayers have abandoned New York for states with lower taxes and a generally lower cost of living.
  

To his credit, Governor Cuomo seems to recognize the danger. His administration has been remarkably pro-growth, especially considering that he leads a party that in some quarters is openly hostile to taxpayers and businesses. His property tax cap, adopted this year, is the first real tax reform in decades and he should be commended for resisting the very powerful government worker unions that fought hard this year for a fictional "millionaire's" tax that would have crushed small businesses.

But there is more work to be done, and a lot of it. For starters, New York should repeal the thoughtless MTA Payroll Tax which punishes employers in and around the City and makes the state's most important economic center less attractive. The state's income tax is nearly 9 percent, higher than anywhere else in the region except New Jersey. But with Governor Christie next door slashing spending that small advantage probably won't last.

New York's regulatory system remains one of the worst in the country, a heavy net of incompatible, incomprehensible and indefensible rules that make it exceedingly difficult to do business in the state. This is a bigger risk than you might think. According to the US Small Business Administration the average small business has to spend more than $10,000 per year per employee to comply with federal regulations. No one has calculated the cost in New York, but given that our rules in many cases exceed federal standards it's logical to assume thousands more in job squashing burdens.

The state is fortunate to be situated on top of one of the most abundant natural gas supplies in the world, and officials recently dipped their toes into what could be an economic bonanza for New York. But pressure groups are already hard at work trying to kill the new industry in its crib, or encumber it with so many nitpicking rules that it simply hop scotches over New York to Pennsylvania or West Virginia. We can't afford to let that happen.

Governor Cuomo pointed out in his inaugural speech that we have no future as the tax capital of America. The same must be said of regulations as well. As the migration data prove, the great beacon of opportunity is flickering out. Money is moving, along with jobs and prosperity, to places where New Yorkers see for themselves a brighter future. If it's true that their hearts will remain in New York then it should be easy to persuade them against leaving at all with lower taxes and smaller government.