With Gov. Cuomo now threatening to go for “soak the rich” tax rates if he doesn’t get a federal bailout as ginormous as he wants, it’s well worth remembering just how much New York already depends on these citizens — who can easily afford to move away.
Indeed, many have decamped temporarily during the pandemic — but they’re still paying taxes as New York residents. What if that changes?
Enter a new Manhattan Institute report by Michael Hendrix and Don Boyd, which looks at the fiscal consequences just for New York City — which leans on top earners less that the state government — if the 1 percent wave bye-bye.
The nearly 660,000 New Yorkers (more than 17 percent of all city income-tax filers) who qualify as top earners generated more than 80 percent of New York City’s income-tax revenue in 2018 (the latest year for which complete data are available).
They also account for a big chunk of the take from the unincorporated-business tax and sales taxes, in all “giving” over 22.6 percent of the city’s total tax revenue.
If only 1 percent of these top-earners permanently revoke their New York residency and do their business elsewhere, it could cost city government $220 million a year in tax revenue. If 3 percent go, it’s $576 million. And if 5 percent leave, it’s $933 million.
Not to mention the loss to the state, which would likely have to cut what it sends the city.
It could be far worse. In some of Manhattan’s richest neighborhoods, departure rates this year are as high as 50 percent — 10 times the study’s worst-case-scenario.. And a Sienna poll this August found that 44 percent of six-figure earners had considered leaving the city in the prior four months.
The real question is: How many will return when the virus is beaten? Everyone now knows how practical remote work can be, especially for top-paying jobs in areas like legal, accounting and financial services.
If New York politicians aren’t careful, they may turn the temporary exodus amid the pandemic into a permanent devastation of the tax base.