An interesting report was released last week by the Empire Center for New York State Policy. The report notes that in both total numbers and as a percentage of total population, more citizens have left New York than any other state over the last decade. Or, as the report succinctly puts it, “The Empire State is being drained of an invaluable resource – people”. A nice summary of the report is available here.
What ties this to tax reform, you ask? A lot, actually. From the conclusion of the report:
What accounts for New York’s chronic inability to attract and retain more Americans than it loses every year? Any attempt to answer that question must begin with New York’s state and local tax burden, perennially ranked among the heaviest in the country. Taxes aside, likely explanations differ regionally. Downstate residents face high taxes and housing costs rated among the most “severely unaffordable” in the world. Land-use regulations in downstate New York also tend to inhibit growth. In upstate New York, housing is relatively inexpensive but even more heavily taxed, and new economic opportunities have been scarce.
This outwards migration has costs the state $4.3 billion worth of revenue for the state in 2006-2007 alone. Furthermore, the average citizen that has left the state makes approximately $20,000 more than any that move into the state.
To make the point clear, this is what we at ATR point out all the time. People and capital are mobile. When governments raise taxes, people, jobs, and companies leave the area. If a state is facing an overspending problem, raising taxes is not the answer. In fact, doing so only makes the problem worse. It shrinks the population size, and thus less revenue comes into the state. Those that do not leave are faced with an even larger, compound problem, in that they now have to pay the bill alone and their employers are no longer around. Sooner rather than later this becomes unsustainable, and states will face massive debt problems and no means to pay for even basic services. States and governments can not tax their way out of overspending problems; this report only further illustrates why.
Oh, and apologies to Sean Carter for the title of this post. I couldn’t resist.