New York City is losing its status as the financial services capital of the country.
New York's financial services industry, a major contributor to the state's gross domestic product, is in danger as the population of high-income earners flees due to rising taxes and housing costs, a damning new study finds.
“Future success is not assured as other states are attracting talent and investment in this sector,” the New York State Business Council report said.
“Addressing the state's tax burden, business climate and cost of living issues will help ensure New York's position as a national and global leader in finance.”
According to an analysis conducted by the business council, the top four states for gaining new high-paying financial services and insurance jobs over the past three years were Texas, Florida, North Carolina and Georgia.
New York ranked 36th in growth rate, with an increase of just 0.2%.
“North Carolina and Florida are adding jobs rapidly in the finance and insurance sector, while New York's employment growth remains below national trends,” the report said.
The study noted that for every financial sector employee, roughly three additional jobs are created in other sectors, so job losses will ripple through the economy.
“This report should serve as a call to action for leaders across New York to forcefully address the competitiveness issues that threaten one of New York's most valuable and important economic strengths: the financial industry,” the study said.
The average compensation package in New York's financial services industry is the highest in the nation at $309,000 per year, which includes a salary of $275,800 plus $34,000 in other benefits.
The figures mark a continuation of New York state's declining population trend, which fell 2.7% from 2019 to 2022, the worst decline among the 50 states during the COVID-19 pandemic.
Most of the population loss occurred in New York City and its suburbs, home to most of the state's wealthiest residents.
When we looked at net residential migration, Manhattan had the largest total income outflow, at about $11 billion.
“The data confirms the exodus of wealthy individuals from the New York City area,” the business group's study said.
In 2021 alone, the Empire State saw a net loss of $9.8 billion in revenue flowing into Florida, according to the report.
That's no coincidence, the study said, noting that the Tax Foundation think tank ranks New York state as having the highest combined state and local tax rate for residents, while Florida has the lowest.
“This competitive factor [taxes] “High-income migration is likely driven largely by the migration of wealthy individuals who stand to benefit most from moving from high-income tax states to low- or no-income tax states,” the study said.
He also noted that New York is one of the few states that imposes what has been mocked as an “inheritance tax” on estates.
“Wealthy individuals are more likely to consider this tax in their residency decisions,” the report said.
“Strong action is needed,” the analysis concludes. “The state will need to address the tax burden, business climate, and cost of living issues that undermine the state's competitiveness.”
“If the state does not address these issues, it risks losing its edge in the finance and insurance industries, ultimately jeopardizing the health and prosperity of New York's economy.”
