metro
Published October 29, 2023, 8:14 p.m. ET
The Empire State is losing its status as the country’s financial services capital.
New York’s financial services industry, a major contributor to the state’s gross domestic product, is at risk from a decline in the number of high-income residents fleeing high taxes and rising housing costs, according to a sobering new study.
“As other states attract talent and investment into the sector, there is no guarantee of future success,” the New York State Business Council report said.
“Addressing the state’s tax burden, business climate and cost of living can help secure New York’s position as a national and global leader in finance.”
Texas, Florida, North Carolina and Georgia were the four states that added the most new high-paying jobs in financial services and insurance over the past three years, according to an analysis by the Business Council.
New York ranked 36th in percentage growth – at a rate of a measly two-tenths of 1%.
“North Carolina and Florida have rapidly added jobs in the finance and insurance sectors, while employment in New York lagged behind national growth trends,” the report said.
New York’s financial services industry is at risk from a shrinking population of high-income residents fleeing high taxes and rising housing costs.Getty Images
Every employee in the financial sector creates almost three additional jobs in other sectors – so every job loss has an impact on the entire economy, the study says.
“This report should serve as a call to action for leaders across New York to aggressively address the competition issues that threaten one of its most valuable and critical economic forces, the financial industry,” the study said.
The average compensation package in the New York financial services industry nationally is $309,000 per year – $275,800 in salary plus $34,000 in other benefits.
The numbers showed continued trends of population decline in New York – with a 2.7% decline from 2019 to 2022 – marking the worst loss among the 50 states during the COVID-19 pandemic.
The greatest population loss occurred in New York City and its suburbs, where most of the state’s wealthiest residents live.
New York ranked 36th in percentage growth – at a rate of a measly two-tenths of 1%. Newsday via Getty Images
A review of net immigration of residents found that the largest gross income exodus came from Manhattan, at nearly $11 billion.
“The data confirms the flight of the wealthiest from the New York City area,” the group’s review said.
According to the report, the Empire State saw a net decline of $9.8 billion in revenue moving to Florida in 2021 alone.
That’s no coincidence, the study said, noting that the Tax Foundation think tank rates New York as the state with the highest combined state and local tax rate for residents and the Sunshine State as the state with the lowest.
“This single competitive factor [taxes] “likely plays an influential role in the migration of high net worth individuals because they benefit most from leaving a high income tax state to a low or zero income tax state,” the study says.
The average compensation package in the New York financial services industry nationally is $309,000 per year – $275,800 in salary plus $34,000 in other benefits. Newsday via Getty Images
It was also noted that New York is also among a small group of states that impose an inheritance tax, derisively referred to as a “death tax.”
“High net worth individuals are likely to take this tax into account when making location decisions,” the report said.
“Strong action is required,” the analysis states. “The state must address the tax burden, business climate and cost of living that affect the state’s competitiveness.
“If the state does not address these issues, it risks losing its dominance in the financial and insurance industries and ultimately jeopardizes the health and prosperity of New York’s economy.”
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