Key Highlights
- Data from UPS, moving companies and smartphone tracking indicate elevated out-migration from NYC
- Deepening concerns about NYC’s projected $9B budget shortfall
- Lower tax obligations in locations other than NYC difficult to ignore
As it currently stands, the State of New York levies taxes of 8.8% on wages for high earners. New York City levies taxes of another 3.9% on top of that 8.8%. The total personal income tax amount for a high earner living in New York City comes to nearly 13% per year.
Why wouldn’t high-earners, particularly those in tech and finance, consider leaving New York City?
Turns out that many of them already have or soon will be. Spurred by remote working and concerns for health and safety due to the COVID pandemic, what was once a trending exodus from high-tax, densely populated urban areas is now a real exodus. On top of personal income taxes that become higher and higher the more someone earns, New York City is now projecting a $9B budget shortfall that is almost certain to cost NYC residents even more in taxes.
According to a survey done by the Manhattan Institute, nearly 50% of New Yorkers earning more than $100,000/year said they’re considering leaving NYC. Why? The high cost of living. The COVID pandemic has caused the worst global economic crisis since the Great Depression. Business districts and the city itself are being strangled by the lack of much needed revenue.
Just one of the thousands of out-migrators, Brennan Hefner, co-founder and CEO of Analyst Hub and 20+year resident of NYC, moved this summer to Dallas. Hefner said, “I’m just not sure it’s a requirement to be in the city anymore. That doesn’t mean that I don’t love (NYC), I do. It’s an amazing place, but as far as a family of five, I’m not sure if it’s the right place for us at this time.”
Lower cost states such as Texas, Florida, and Nevada have no state income tax. Having to ride mass transit to densely populated workspaces is no longer necessary with the tech amenities of such outfits as Zoom and Slack. Why not live and work (remotely) in a place where the cost of living is significantly less and the convenience of living is significantly more?
Hefner’s Analyst Hub co-founder Michael Kronenberg has spent the pandemic out of his Manhattan apartment and renting homes in places such as Scottsdale AZ, Vail CO and Sullivan’s Island SC. Kronenberg said, “Everybody I know is leaving. It’s not just New Yorkers. My partners, long-time clients and investors of mine that live in Connecticut or New Jersey, they are used to commuting in to the city. They’re never going to commute in five days a week every again.”
Not only are individuals leaving NYC, businesses are too. Hedge funds, fintech companies, professional services operators and public relations and accounting firms, and Wall Street start-ups are incentivized to leave in order to save hundreds of thousands if not millions in after-tax pay. Mark Klein, a NYC-based tax attorney and chairman of Hodgson Russ who helps advise people making more than $800,000/year move to low-tax states, said, “I’ve never been as inundated with people leaving New York and Connecticut, any of these high-tax states, in my 40 years of doing this.” Now seeing ten times more clients than pre-pandemic, Klein said, “Once COVID hit, with the recognition that people can work from any location, the floodgates opened.”
(In this two-part piece focusing on big city movers to smaller, more affordable locations, you’ll find additional data points and information relevant to out-migration patterns in Part II of “Americans on the Move.”)
Thanks to Manhattan Institute and CNBC.
Also read: National Rent Index Down -0.3% Since Pandemic Beginnings, New Yorkers and Tri-State Residents Leaving in Droves, Nearly 900,000 Filed New Unemployment Claims Last Week
