Even when the COVID-19 pandemic becomes a distant memory, Americans will still be paying for the record-breaking government debt incurred by government overspending — the vast majority of which unfortunately had little or nothing to do with pandemic-induced health-care needs. After all, while the pandemic negatively affected every American in some way, it was thankfully not an existential threat to the free world — and it did not require World War II levels of national debt to keep Americans on their feet. Yet New Yorkers, more so than any others in the country, are on the verge of feeling the true weight and cost of the pandemic.
New York tax and fiscal policy has not gone unnoticed. Indeed, as thousands and counting have left the Empire State, the U.S. Census recently reported that New York will lose one seat in the 2020 congressional reapportionment. As demographers now attempt to sort out some discrepancies between the annual Census estimates this past decade, which in recent years showed even more of a loss, and the actual new numbers, one thing is crystal clear: New York’s population continues to grow at a substantially slower pace than the nation as a whole.
The real long-term problem in New York is its embrace of big-government-style tax and spending. It is difficult to comprehend, but New York’s budget for 2021 was more than twice as much as Florida’s, despite having more than 1.3 million fewer residents. Merely shifting tax burdens from the state to the federal level — as recent federal bailouts do — is a progressive accounting gimmick at best. And, by the way, the federal government’s debt has now passed $28 trillion for the first time ever. We continue to watch inflation, a hidden tax on hardworking Americans, as many have noticed the uptick in prices for commodities, and certainly as drivers have noticed when they have visited their local gas stations in recent weeks to fill up their tanks. Meanwhile, to make matters worse, the state of New York is also setting up taxpayers for a record tax and spending increase in 2021 — despite taking massive federal aid packages in the past year.
Progressive legislators in Albany led the effort to pass a $212 billion budget, which is a $35 billion increase from last year’s $177 billion budget for FY 2021. Put another way, as hardworking taxpayers and businesses were tightening their belts this year, state government in New York grew by roughly 20 percent. This is a whopping $10,500 of spending per capita for each of the Empire State’s 20.2 million residents, almost as much spending as Texas and Florida combined, which have 50.6 million people and annually spend $226.5 billion combined.
Given enhanced workplace flexibility, many New Yorkers have fled the state for those with less stringent lockdowns, lower costs of living, and friendlier business climates. Many of the businesses that have stayed in New York, for the time being, have spoken out against the latest rounds of taxes and spending. In a letter to state leaders in Albany, 250 of New York’s employers addressed the recent agreement that green-lighted massive tax and spending increases that will be placed on the backs of New York taxpayers. The business leaders noted that these increases are “both unnecessary and economically risky” and “will jeopardize New York’s recovery from the economic crisis inflicted by COVID-19.”
Albany hopes that raising new taxes and taking on more debt will allow it to keep spending at record-breaking levels. That plan, however, will only push it further out on the wrong side of the Laffer Curve, where tax increases fail to generate all of the new revenue promised because of their harmful impact on economic behavior. The current $4 billion–plus of tax increases on the wealthy will still leave a $22 billion revenue hole for 2022. A climate change-justified 55 cent per gallon tax increase on gasoline will raise only $2 billion.
And the real New York industry-killer is a proposed renewal of the stock-transfer tax, which advocates forecast will raise $13 billion (on a nickel tax per $100 of stock trade). While seemingly innocuous to progressives, the tax could have devastating economic implications. Indeed, New York Stock Exchange president Stacey Cunningham did not hold back when discussing the effects of Albany’s burdensome policy environment. “The New York Stock Exchange belongs in New York. If Albany Lawmakers get their way, however,” Cunningham commented, “the center of the global financial industry may need to find a new home.”
Even so, progressives are still short of other people’s money to fund everything they would like to; they will, for example, have to dream up other taxes for a health-care system that is drifting toward a first-in-the-nation single-payer model. The likely outcome of the already sky-high and rapidly growing tax burden is that New York’s voters will continue to “vote with their feet” and continue to flee. Call it “Escape from New York, Part Two.”
Even before the increased tax rates in response to the pandemic, the Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index had begun to document the Census’s estimates of New York’s devastating outmigration. Rich States, Poor States also found that New York had the worst economic outlook in America for yet another year in 2020. This dubious distinction is due to already high income and property taxes as well as to other anti-growth policies, such as high minimum-wage costs, high Medicaid costs, and high workers’-compensation costs. It is time to stop the bleeding before it is too late by taking a look at how America’s prosperity states effectively manage their finances while remaining economically competitive.
While Florida may have nicer weather, the Sunshine State’s pro-growth economic policy is the real attraction for New Yorkers and others who have recently taken up residence in the state. Governor Ron DeSantis has worked diligently to keep Florida’s economy moving in a free-market direction, and his state has benefited enormously from being one of the nine states in America that completely avoid a personal income tax. The new Census numbers indicate that Florida will reap the political benefits of their competitive economic framework, as the state will add yet another congressional seat to its delegation starting in 2022.
At the end of the day, all of the various taxes at the federal, state, and local levels add up to choices in which Americans can exercise their freedom to live anywhere in this country. In fact, if New York simply spent at the same per-resident level as Florida did, the Empire State would save nearly $60 billion per year.
For the past decade, many state leaders in Albany have taken New York’s taxpayers and their businesses for granted. Now, thousands have left the state for locations with lower tax burdens and better business climates. More will follow them unless things change.
Robert J. Smullen, Colonel USMC (Ret.) is the New York State assembly member for the 118th district. He is a distinguished graduate of the Eisenhower School at National Defense University. Jonathan Williams is the executive vice president of policy and chief economist at the American Legislative Exchange Council.