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Manhattan Institute

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NY's Fleeing Taxpayers


NY's Fleeing Taxpayers

October 10, 2003
Urban PolicyNYC

During the recent debate over how to close New York's budget gap, Mayor Bloomberg argued that raising taxes wouldn't hurt the city, since it is such a great place that people will clamor to live there, whatever it costs. The mayor should look hard at new Census Bureau statistics: Even before he hiked taxes, people were fleeing the city.

From 1995 through 2000, a period of economic growth, 1.37 million New Yorkers left the city, while only 825,904 residents came here from somewhere else in the U.S.: a net loss of 545,269 people.

Brooklyn had the biggest drain, down a net 233,555 residents. Yet even Manhattan, the place New York mythology describes as irresistibly attractive to all the right people, suffered a net loss of more than 57,000 U.S. residents. Only Staten Island, the least hip of the city's boroughs, wound up on the plus side, attracting 1,470 more U.S. residents than it lost.

The sole bit of "good" news for the city as a whole: The rate of out-migration seems to have slowed somewhat from the late 1980s. Even that mildly good news may be premature, though: the Census figures don't include the post-9/11 period.

Fears of terrorism, plus a rockier economy, have made the city even more unappealing, according to the Brookings Institute's preliminary analysis of Census data, which suggests that Gotham's out-migration rate may have sped up since the terror attack.

Not only are people getting out of the city; they're leaving the state too. New York suffered the greatest net loss of U.S. residents of any state from 1995 through 2000—down 874,248 people. That outdid the second-biggest loser, California, by more than 100,000 residents.

New York and California accounted for 55 percent of the net loss of all states that experienced out-migration. And both states' out-migration rates are accelerating—in New York's case, partly because of a huge exodus from Erie (down 41,115), Monroe (down 32,858), and Onandaga (down 22,755) Counties.

This massive loss of population is a key reason that New York and California have faced greater budget woes than most states. Only an influx of foreign immigrants has kept these two states from even bigger population losses.

Yet the vast majority of these foreign-born newcomers, are poor, ill-educated and unskilled, while many of those leaving are well educated and well paid. New York State surrendered $2.7 billion in household income to New Jersey alone between 1992 and 1997, thanks to better-off residents fleeing there, an Empire Foundation report observes.

While the Census study does not say what propels such massive out-migration, job-killing taxes are a likely culprit. Most of the states joining California and New York on the list of losers—including Connecticut, Illinois, Michigan and Ohio—also have among the heaviest state and local tax burdens in the U.S., with Gotham being one of the country's highest-taxed places to live.

Most of the states that had the greatest net gain in residents, by contrast, have low taxes, with four - Florida, Nevada, Texas and Washington—having no personal income tax at all.

Steven Malanga is a contributing editor with the Manhattan Institute's City Journal. Adapted from the Fall issue of CJ.