“I’ve seen the lights go out on Broadway; I saw the Empire State laid low; And life went on beyond the Palisades; They all bought Cadillacs; And left there long ago.”
While Billy Joel wrote those lyrics for Miami 2017 way back in 1975 as New York City sat on a mountain of debt and was nearing default, he could easily have been talking about the COVID years.
More than one out of every 100 residents who paid income taxes in 2020 left New York State,
In 2021, the total number of New York’s personal income tax filers declined for the first time since the Great Recession, the report said, which examined personal income tax (PIT) filings for 2020 and 2021, the most recent years for which finalized tax data was available.
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“The pandemic upended everyone’s life and caused a big shift in the movement of New York taxpayers in 2020,” DiNapoli said. “While patterns shifted closer to pre-pandemic trends in 2021, net out-migration rates remained higher, particularly for families.”
Personal income taxes are New York State’s largest revenue source. In 2021, 10.9 million taxpayers paid $60 billion in taxes to the state.
“Despite the recession of 2020, the number of taxpayers grew, likely due to high financial market levels and enhanced unemployment benefits that increased personal income,” the report said. “In 2021, the number of filers declined, but was slightly greater than the number in 2019.”
In 2021, about 87% of PIT filers were full-time residents while 10% were non-residents who only pay PIT on income received from work, businesses or other sources in New York and 3% were part-year residents.
Still, New York is still a big draw to people from all over the country and the world, John Hallacy, founder of John Hallacy Consulting LLC, told The Bond Buyer.
“New York continues to have wonderful attractions and offerings for people from all walks of life. Other locales cannot compete with many of the amenities here, but they do compete on price,” Hallacy said.
“It has become a very expensive place to live comfortably. Even with the STAR program and other credits and benefits, the government’s take is large,” he said. “The concentration of brain power and people with like-minded skills is a draw. But, as the saying goes, you need positive cash flow to remain here.”
STAR is the state school tax relief program, which provides an exemption from school property taxes, which can be quite sizable.
“It will be interesting to see if congestion pricing has any impact on property values,” he said. “It is hard to conceptualize any tax reductions of any kind in the future in New York or California. Housing values in California are among the highest, with the top ten list dominated by California cities.”
Healthcare in New York City is considered among the best in the country, he noted, “but a lot of other cities have now built out their infrastructure to serve the populace.”
The comptroller’s report detailed the pandemic’s impact on taxpayer movement out of the state.
“From 2015 to 2019, there was a consistently larger number of taxpayers leaving the state than coming in, with an average annual net out-migration of roughly 28,700 taxpayers during this period,” the report said. “In 2020, the number moving out of state increased dramatically, resulting in a net out-migration of nearly 112,500 — almost four times the number in 2019.”
However, it noted, by 2021 the number of people moving into the state rebounded and was more than one and half times over the year prior, and was also higher than the average in-migration from 2015 to 2019.
“Still, the number of taxpayers moving out was greater, resulting in a net out-migration of over 39,200, more than one-third greater than the pre-pandemic average,” the report said. “In the aggregate, out-migration rates declined to just over four in every 1,000 taxpayers in 2021 from almost 12 in 1,000 in 2020. However, this rate was greater than the 2019 rate of three in 1,000.”
Single filers comprise the largest share of state PIT taxpayers and accounted for over half of the net out-migration in 2020, the report said. Married and head of household taxpayers also left New York at higher rates in 2020, nearly double those in 2019.
In 2021, families continued to leave New York at higher rates than prior to the pandemic. In 2021, an equivalent of one in every 100 married resident filers left New York. Married filers earning between $100,000 and $500,000 continued to lead the out-migration, a trend that continued from prior to the pandemic.
In 2022, issuers across New York State ranked first in the nation for municipal bond issuance, up from number three in 2021, selling more than $49.39 billion of debt last year, according to Refinitiv.
The state’s general obligation bonds are rated Aa1 by Moody’s Investors Service and AA-plus by S&P Global Ratings, Fitch Ratings and Kroll Bond Rating Agency.
On Thursday, Dec. 14, Empire State Development is set to competitively sell almost $847 million of tax-exempt PIT revenue bonds in three offerings.
The sales consist of $344.02 million of Series 2023B PITs (Bidding Group 1), $252.805 million of Series 2023A climate bond certified PITs (Bidding Group 2) and $249.805 million of Series 2023A climate bond certified PITs (Bidding Group 3).
Out of state-migration was driven by an increase in taxpayers leaving New York City in 2020.
“With the pandemic impacting the city earlier and more severely, net out-migration from the city to places both in and outside the state spiked, with over two in every 100 city residents moving out in 2020,” the report said. “The surge was driven by taxpayers who left the state altogether, and city residents represented 71.5% of the state’s net out-migration in 2020.”
The report noted that in 2021, however, the city saw a gain of 2,221 taxpayers, which was attributed to taxpayers moving in from other parts of the state while 761 taxpayers left.
Before and during the pandemic, “the majority of taxpayers leaving New York City relocated to the two other downstate regions, with the largest number moving to Long Island,” the report said. “However, the number of city taxpayers moving to the other regions of the state more than doubled in 2020 and remained above pre-pandemic levels in 2021.”
Meanwhile, the city is facing an
“Since last year, nearly 100,000 asylum seekers have arrived in our city asking for shelter, and we are past our breaking point,” Mayor Eric Adams said last month.
The city is one of the biggest issuers of municipal bonds in the nation. Its GOs are rated Aa1 by Moody’s, AA by S&P and Fitch and AA-plus by KBRA. In the second quarter of fiscal 2023, the city had about $39.3 billion of GOs outstanding.
So where did the residents all go? Follow the money down South to the Sun Belt states.
Between 2020 and 2022, Florida was number one in in-migration in the nation, seeing 622,476 people move into the Sunshine State from other states. Texas ranked second with 475,252 people moving there, according to the U.S. Census Bureau.
Florida and Texas have no state personal income taxes.
The biggest losers were California and New York. The Golden State was number one in out-migration, losing 871,127 residents during the 2020-2022 time period, followed by the Empire State, which lost 664,921 people.
In 2022, the number of people who moved between all states rose to 8.2 million from 7.9 million in 2021, according to the latest data released Nov. 21 by the U.S. Census Bureau.
Some of the largest state-to-state out-migration flows last year were people moving from highly populated states, the Census Bureau said.
“The two largest flows, which were not statistically different from each other in size, came either to or from the four most populous states: Large numbers of people moved from California to Texas and from New York to Florida,” said Mehreen Ismail of the Census Bureau.
In 2022, New York saw 91,201 people move to Florida while California saw 102,442 people move to Texas.
And it’s not just people moving around — many businesses are also expanding down South.
On Wednesday, BNP Paribas Securities Corp. opened its
“I’m a big believer in what’s going on in Miami. We’ve seen the migration of our clients down to South Florida and we want to respond to that by being in a place where we can meet them on a regular basis to help grow our relationships with them,”
“Adding Miami as a key location for our corporate and institutional banking business will be an important part in getting closer to our many clients in the South Florida area and servicing their needs more efficiently,” according to José Placido, chief executive officer of BNP Paribas USA.
Hallacy said all is not lost for New York.
“Perhaps, the wave of AI business-related activities will have a positive impact to reverse the outflows,” he said.
“The challenge is also focused on Baby Boomers who are trying to do the best they can on fixed incomes while inflation is making everyday expenses even more dear,” he said. “If successful, the Federal Reserve will have a positive impact on this score.”
The Federal Open Market Committee is set to meet Dec. 12-13 to decide the future of interest rates. They are expected to leave the fed funds rate target at a range between 5.35% and 5.5%.
DiNapoli said state and city officials must also take an active role in promoting the economic well-being of its residents.
“Policy makers need to make sure the state remains an attractive, affordable place to work and to live,” DiNapoli said. “Doing so will help maintain the state’s largest revenue source to ensure vital services continue in order to provide a high quality of life for all New Yorkers.”
And perhaps Billy Joel could really see into the future.
“You know those lights were bright on Broadway; But that was so many years ago; Before we all lived here in Florida.”