New York budget disaster further fueling exodus from Empire State

New York Governor Andrew Cuomo announced this month that the state faces a surprise hole in its budget to the tune of $2.3 billion. The legacy Democrat failed to add that the deficit was caused by oppressive policies that have gutted the population and wealth of New York. Instead, Cuomo conveniently blamed President TrumpDonald John TrumpTed Cruz knocks New York Times for 'stunning' correction on Kavanaugh report US service member killed in Afghanistan Pro-Trump website edited British reality star's picture to show him wearing Trump hat MORE and the Republican tax cuts for the shortfall. While the new cap on the state and local tax deduction has likely prompted some of the high earners in New York to pack up and move to low tax jurisdictions, it is not tax reform causing the bulk of the exodus. Rather, decades of poor policies at the state and local level are to blame.

New Yorkers pay an average of 12.7 percent of their income in state and local taxes and face some of the highest property taxes in the nation. New York City, where more than 40 percent of the state population lives, is the most expensive city in America, with affordable neighborhoods ridden with crime and homelessness. It is no wonder why people are fleeing in droves, with 1.2 million New Yorkers leaving since 2010. Last year, New York had the largest overall population loss in the nation. As residents continue to leave, the huge hole in the state budget will only increase.

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Amid the revenue shortfall, Cuomo appears to show a unique mix of blissful ignorance and learning the hard way in his response. He aims to close the state budget gap through a number of proposed taxes, rather than smart spending cuts. Cuomo suggested delaying business tax credits, placing an electricity tax on companies, adding an insurance tax surcharge, and levying an internet sales tax for out of state retailers.

However, the governor did seem to learn something from the devastating budget news. Cuomo noted that increasing income taxes on high earners is not one of his solutions. Perhaps he will be able to avoid some of the extensive flight of capital and people that has plagued New York for the last 15 years. So one lesson learned and several lessons waiting for the governor to take notes? I guess residents have to take what they can get.

What is worse is the budget decline occurred after Cuomo used gimmicks to hide the poor state of New York finances. He used misleading budget tricks to hide $4.1 billion in expenditures that he spread out over multiple fiscal years. Despite promising to hold spending growth below 2 percent, Cuomo has only been able to claim this through a budget sleight of hand. In 2017, for example, about $1.4 billion in revenue from the Metropolitan Transportation Authority mobility tax went directly to the agency rather than to Albany. The agency will still end up spending those funds, which will not be counted against the spending cap imposed by the governor.

The largest share of people leaving New York are middle class workers and high income earners. Indeed, the Empire State is the number one state where residents making more than $200,000 are leaving. Meanwhile, the middle class now represents a minority of the residents in New York City. Income and property tax hauls will continue to fall as state officials have yet to learn from their policy errors. They should note that United Van Lines determined the rates of residents leaving and found astonishing results. Last year, it found that almost 62 percent of moves in New York were outbound. The survey also found that 41 percent of those who left earned more $150,000 and only 8.4 percent earned less than $50,000.

Sadly, New York is not an outlier. High tax states, usually dominated by Democrats, are facing departures of epic proportions. According to 2018 census figures, the trend is accelerating. Low tax states like Texas, Florida, Nevada, Arizona, and more are gaining residents at record numbers. New York topped the list of states with the highest overall losses, with 180,000 more residents leaving than coming in, followed by California and Illinois. It is no mistake that the states losing the most population rank lowest in tax and regulatory competitiveness across the country year after year.

New York is killing the goose that laid the golden egg through decades of poor policy decisions and an unfair tax system. Rather than blame Trump for financial problems of his own making, perhaps Cuomo is better off grabbing the paddles of fiscal reform to keep his flatlining patient alive.

Kristin Tate is a libertarian writer and author of “How Do I Tax Thee? A Field Guide to the Great American Rip-Off.” Follow her on Twitter @KristinBTate.