The New York Daily News today published an op-ed from New York State Comptroller Thomas P. DiNapoli and President and CEO of the Business Council of New York State Heather Briccetti Mulligan.
The full op-ed is below:
NY’s tax base dips with population
For several years leading up to the COVID pandemic, New York State was experiencing population loss. This loss has accelerated since 2020, and has important implications for the economy, the tax base and the state’s finances. Today, policymakers are at a crossroads with the challenge of keeping New York an attractive and affordable place to live and do business.
Between July 2020 and July 2023, New York’s population declined by more than 533,000 people — about as many people as in the city of Sacramento. Much of this decline happened between 2020 and 2021, as New York was impacted severely in the early days of the COVID pandemic. However, population losses have continued, with New York’s population shrinking by more than 101,000 between 2022 and 2023, the largest decline in the nation.
This population loss directly affects the tax base. A report by the Office of the State Comptroller shows at its peak, New York State lost 1 out of every 100 Personal Income Tax (PIT) filers during 2020, four times the pre-pandemic average. While net-outmigration dropped in 2021, it remained one-third higher than pre-pandemic levels, and remained significantly higher for high-income earners.
Married filers, who have had the highest out-migration rates for several years, left the state at even higher rates in 2021 than they did in 2020. While the overall number of filers is at pre-pandemic levels, a greater share are non-residents, paying state taxes only on income earned in New York State — on average only 20% of income.
These findings are concerning for the long-term prospects of state revenue. PIT is the largest state tax revenue, accounting for more than $60 billion in 2021, and a small set of filers have an outsized impact on revenues. Those with incomes above $1 million were just 1.6% of all filers, but comprised 44.5% of the total liability in 2021. These individuals also realize a larger share of earnings from capital gains and from bonuses, particularly in the financial sector.
The Business Council of New York State partnered with the Securities Industry and Financial Markets Association (SIFMA), and the New York Bankers Association (NYBA) to produce a report that showed outmigration has also impacted the financial sector.
New York State’s finance and insurance sector makes up 5% of the state’s employment, yet the sector is the state’s largest contributor to gross domestic product (GDP), with $327 billion or 16% of the 2022 total. The average earnings for these jobs are three times higher than the statewide average for all sectors, and produce a strong multiplier effect: for every finance job, another 2.66 jobs are created elsewhere in the economy.
Job growth across finance and insurance subsectors has been stronger nationally than in New York. The securities industry is a large subset of the financial services sector, and the greatest number of these high-paying jobs remain in New York State; however, the number has never reached the peak achieved in 2000, and the share of national industry jobs has declined steadily for decades.
In State Fiscal Year 2023, the securities industry contributed $28.8 billion, or 27.4%, of state tax revenues. To the extent firms are relocating from New York or expanding in other states rather than our own, the state is missing out on billions in potential economic activity and revenue.
The Business Council report emphasizes the factors the business community uses to make location decisions, including infrastructure, workforce, and business climate. The analysis indicates New York does not rank well on some measures of business climate. The report also finds that affordability is increasingly a priority for companies and is an area where relatively high individual income taxes and high housing cost burdens may put the state at a disadvantage.
The good news is lawmakers have an opportunity to make New York State more attractive to its people and its employers. Exercising spending restraint will be crucial for taxpayers who continue to see high inflation impacting their everyday family decisions.
Lessening the burden on those who supply the jobs to our friends and families will be beneficial when decisions need to be made about expansion, pay raises, or relocation. Improving the quality of life for our loved ones will have a ripple effect across the state.
Building on our shared commitment to the success of New York and fostering an environment where our residents want to live, work, and grow their families is critical to the state’s economy. People leave this state for elsewhere every day for many reasons; let’s not make their decisions easier.