For years, many people believed that New York City is “where it’s at” - and it’s easy to understand why. The city is the cultural center of the world; it’s also home to an incredible choice of colleges and post-college education. The theater, restaurants, and nightlife are unmatched, there are jobs available in every industry, and the energy and excitement generated here are practically palpable.
Then something changed. People started moving away from both the city and the state – a trickle at first, but then in greater numbers. Now it’s a steady stream.
According to the US Census Bureau, more people are leaving New York State than any other. Between July 2017 and July 2018, the Empire State had a net loss of 48,560 residents. 2019 was the fourth straight year the state’s population decreased. New York State has lost nearly 1.4 million residents since 2010 according to the Empire Center for Public Policy. And the problem is especially severe upstate, where the population has declined in 42 out of 50 counties since 2010.
One reason is jobs or more precisely the lack of them. Major corporations have left or closed, including Kodak (in Rochester), GM (in Buffalo) and GE (in Schenectady). For others, the climate upstate is too cold and snowy.
By comparison, the city’s population has increased by nearly a half million since 2010 but this number is somewhat misleading. True, there are many thousands are moving in here, but there are also many who leave.
In 2017, on average 131 people have left the city each day, up from 43 in 2014, and this number has certainly increased since then. Monsey, Lakewood, and surrounding areas are packed with frum former New Yorkers, and so is the Five Towns.
COVID-19 has accelerated this trend. According to The New York Times, 420,000 people have left the Big Apple between March 1 and May 1, many of them upper middle class or wealthy. Forty percent of the highest earning New Yorkers have left since the pandemic hit.
So many people have left the city that it’s affecting the housing market here. Vacancies in Manhattan are at a 14-year high, and new leases are down 62%. Data from the real estate website Redfin show that New York City is the number one location people want out of now.
If they do not return, the already severe shortfall in tax revenues for both the city and the state will become much worse. Meanwhile, a new soak-the-rich effort may convince those wealthy individuals to stay away and drive out others.
Alexandria Ocasio-Cortez, the first term Congresswoman who thwarted Amazon’s plan to build a HQ in New York – a project that would have created 25,000 high paying jobs and added $500 million to the city’s coffers – has a new plan.
Fox News reports that she is pressuring Gov. Cuomo to soak the ultra-rich and use those proceeds to help people hurt by the virus-induced economic crisis.
“It’s time to stop protecting billionaires, and it’s time to start working for working families,” AOC said.
Tough Times For Billionaires
The state’s 118 billionaires have a combined worth of $566.4 billion. The argument that they need to pay more tax, particularly now when so many people are experiencing financial hardship, may have merit. But there’s a Catch-22 here: Higher taxes look good but often backfire.
When soak-the-rich taxes have been implemented in the past, the rich have packed their bags and left, creating huge shortfalls taxes. Cuomo has said that taxes targeting high earners may chase them away. Budget Director Robert Mujica has pointed out that New York already has one of the highest tax rates for the wealthy in the country.
Former NYC mayor Rudy Giuliani is deeply concerned about the city’s hostility toward its billionaires. “These are basically upper middle class and wealthy individuals,” he said. “They are the tax base of the city. Why do you attack rich people so much? Don’t you realize we need them to pay for the programs that help the poor?” Giuliani added that because of policies targeting the rich he has little hope for the city’s future.
Giuliani’s opinion notwithstanding, Bloomberg reports that AOC’s anti-billionaire crusaders are spreading in New York. Progressive politicians have started a “Make Billionaires Pay” campaign to raise $5.5 billion for unemployment insurance for those hurt by the virus.
Most New Yorkers agree, according to the Daily News; they say the rich can afford to pay more and they should.
Progressive Democrats see the current environment as an opportunity to raise taxes, and they want to start with stock trades, which they believe could generate $13 billion per year, an amount large enough to prevent cuts to numerous government services.
However, in anticipation of higher fees, thousands of hedge fund managers are already leaving the city for no- and low-tax states, Zero Hedge reports. And billionaires and other wealthy residents are likely to follow. By the way, Wall Street pays 17% of the state’s tax revenues and accounts for 181,200 jobs.
The questions that need to be asked now are not whether much higher taxes on the wealthy are necessary or if they are justified. Rather, the questions are whether higher taxes are constructive or if they will jeopardize tax revenues and drive out jobs. In other words, is it practical to soak the wealthy?
The answers are clear but don’t count on logic to prevail here. Virus-related expenditures are skyrocketing for both the city and the state, and at the same time tax revenues are plunging. Politicians may decide that the simplest answer is to make the rich pay.
But the rich don’t want to pay more tax. And with automation and other technology they are not chained to their desks in New York. They could live and work just as easily live in other states and save bundles on taxes. Many have already moved and many more will. And if they do, budget deficits will be even more pronounced.
We may be about to witness an unforgettable cut-my-nose-to-spite-my-face moment. And that could be very painful experience for everyone.