The Empire State is losing its hold as the nation’s financial services capital.
New York’s financial services industry — a major contributor to the state’s gross domestic product — is threatened by a sharply declining population of high-income residents fleeing high taxes and rising housing costs, according to a sobering new study.
“As other states attract talent and investment to 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 ensure New York’s position as a national and global leader in finance.”
The top four states that gained new high-paying finance and insurance jobs over the past three years were Texas, Florida, North Carolina and Georgia, the analysis by the Business Council found.
New York ranked 36th in terms of percentage growth – at a rate of a paltry two-tenths of 1%.
“North Carolina and Florida quickly added jobs in the financial and insurance sectors, while employment in New York remained below national growth trends,” the report said.
Each employee in the financial sector generates almost three additional jobs in other sectors – so any job loss affects the entire economy, the study noted.
“This report should serve as a call to action for New York’s leaders to decisively address the competitiveness issues that threaten one of the most valuable and critical economic forces, the financial industry,” the study said.
The median compensation package in the financial services industry in New York is $309,000 per year – $275,800 in salary plus $34,000 in other benefits.
The numbers show continued trends in New York’s population decline — with a 2.7 percent decrease from 2019 to 2022 — marking the largest loss among the 50 states during the COVID-19 pandemic.
Most of the population loss was in New York City and its suburbs, home to most of the state’s wealthiest residents.
A review of the net migration of residents showed that the largest flight of gross income was from Manhattan at nearly $11 billion.
“The data confirms the flight of the wealthiest from the New York area,” the business group’s review said.
In 2021 alone, the Empire State saw a net drop of $9.8 billion in income migrating to Florida, according to the report.
That’s no coincidence, the study said, noting that the Tax Foundation think tank rates New York as having the highest combined state and local tax rate for residents and the Sunshine State the lowest.
“That single competitive factor [taxes] likely plays an influential role in the migration of high net worth individuals, as they stand to gain the most by leaving a high income tax country for a low or zero income tax country,” the study said.
He also pointed out that New York is also one of a small collection of states that levy an estate tax, derisively called the “death tax.”
“High net worth individuals are likely to factor this tax into their location decisions,” the report said.
“Strong action is needed,” the analysis concluded. “The state will have to address the tax burden, business climate and cost of living that are hurting 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 endangering the health and prosperity of New York’s economy.”