New York City has its own municipal income tax. Combined with the NY state tax, it’s the second highest tax rate in the nation.
NYC is the only U.S. jurisdiction that comes close to challenging California’s place at the top of the income tax (dung) heap. The top NY state income tax rate is 8.82%, while the top NYC income tax is an additional 3.876% (ya gotta wonder why they calculate the tax to a THOUSANTH of a percent). And BTW that top city income tax kicks in at only $50,000 of income.
https://smartasset.com/taxes/new-york-paycheck-calculator#newyork/overall
Thus the top combined NYC tax is 12.696% — challenging (unsuccessfully) California’s top rate of 13.3%. Moreover, NYC has a cost of living that is even higher than the average CA COL. The theory of NYC politicians is that taxes don’t matter — some businesses HAVE to be in NYC — notably financial businesses.
Wrong! This is the electronic age. More and more, businesses are learning that location DOESN’T matter — at least when the cost differential gets too great. Such is the case with more and more NYC financial firms.
In a recent WALL ST JOURNAL edition there’s a story of a top money manager firm that is leaving NYC and moving to Nashville, Tennessee — a state with a tiny and soon disappearing state income tax. And of course, the TN COL is FAR lower than NYC. The firm will keep a satellite office in NYC, but most of its operations including the CEO are heading off to Dixie.
And the departing firm is not alone. Excerpts from the story:
One of the oldest names on Wall Street is moving to one of the fastest-growing cities in the South, reinforcing a recent shift in finance jobs to cheaper parts of the U.S.
AllianceBernstein Holding LP plans to relocate its headquarters, chief executive and most of its New York staff to Nashville, Tenn., in an attempt to cut costs, according to people familiar with the matter. That largely ends a 51-year presence in the nation’s traditional finance capital.
. . .
In a memo to employees, AllianceBernstein cited lower state, city and property taxes compared with the New York metropolitan area among the reasons for the relocation. Nashville’s affordable cost of living, shorter commutes and ability to draw talent were other factors.
Other money managers have also relocated staff to smaller, lower-wage cities that are emerging as unlikely hives of finance. Pacific Investment Management Co. plans to open a new office in Austin, Texas, later this year as part of a push to hire more tech-savvy workers, The Wall Street Journal reported last month. Denver, meanwhile, has been host to a growing number of Charles Schwab Corp. and Fidelity Investments employees.
Wall Street’s migration began after the last financial crisis as banks and money managers looked to trim expenses or take advantage of lower tax rates. Hiring in lower-cost regions can mean millions of dollars in annual savings.
A new tax plan passed last year by Congress also reduced tax breaks that many in the New York region heavily lean on, such as the deductibility of mortgage interest and state and local tax deductions.
. . .
Logically speaking, similar decisions will be made by more and more moveable CA businesses. The change in the federal tax law on the deductibility of state taxes on federal income tax returns is huge — an effective SIXTY PERCENT increase in a state’s NET income tax for high income earners — commencing January of this year (2018). Our brilliant Golden State politicians are vaguely aware of this problem, but brush it off because “we have great weather.”
Unfortunately great weather does NOT help a firm’s bottom line, while CA high taxes, COL and anti-business climate do great damage to a company’s profit level.
Indeed, it’s my opinion that if a public company that can be moved (a non-retail company) remains in CA, their board of directors is guilty of fiduciary malfeasance. And I suspect more and more board directors will reluctantly reach the same conclusion.
We gotta come up with a new nickname for our “Golden State.” Our current moniker is just too embarrassing to keep.
Comments 5
And yet California just passed the UK as the fifth largest economy in the world.
http://www.sacbee.com/news/business/article210466514.html
Author
Yes, California has the “5th largest economy in the world.” So?
CA is a huge state with a HUUGGGEEEE population — over 40% more people than the second most populous state of Texas. And CA has an uber-HIGH cost of living.
Based just on GDP, CA ranks as the 5th largest economy in the world. But adjusted for population and cost of living, CA ranks lower than all but 13 U.S. states.
http://riderrants.blogspot.com/2016/07/updated-2015-figures-ca-per-capita-gdp.html
As a consequence, according to the Census Bureau, California’s real (“supplemental”) 2016 poverty rate (the new Census Bureau standard adjusted for the COL) is still easily the worst in the nation at 20.4%. We are 46.5% higher than the average for the other 49 states. Texas is 14.7%. The CA poverty rate is 38.8% higher than Texas.
https://www.census.gov/content/dam/Census/library/publications/2017/demo/p60-261.pdf
Table A-5 on page 27
California is a huge state? Actually, Texas’ land mass is 68% larger. Shouldn’t more people live in Texas and shouldn’t the Conservative’s Utopia have a larger economy?
Speaking of population, how is it that, with everyone supposedly fleeing California, California still has almost 50% more people than the much larger state of Texas?
Author
Nice switch, HQ. When you can’t debate an issue of substance, switch to square miles.
There’s no denying that — when it comes to weather and geography — California kicks the Lone Star State’s butt. Which makes the population shift out of CA all the more impressive. No one leaves Calif. for hot, muggy, buggy, flood prone, tornado ravaged Texas BECAUSE of the weather — they leave IN SPITE OF the weather.
And yes, every year more people leave from Taxifornia for Texas than come to the Workers’ Paradise from Texas — what’s called “net domestic migration.” Every year since 1992, apparently.
For decades the opposite was the case — people flocked to the Golden State from all over the nation — “California dreaming.” That trend reversed in 1992. Since then over 4 million MORE people left CA for other states than moved here from other states — an astonishing figure when you consider that CA has the finest weather in the nation (at least in the populous coastal areas).
No HQ, “everybody” is not supposedly leaving for other states – the typical straw man argument you present so you can rebut an assertion that no one is making. But it IS true that MORE people are annually leaving CA than coming here within the U.S. Every year.
Sooooo, which state is growing faster — CA or TX? Do you really want to know? After all, facts are not your friend.
No matter. Others WILL find such facts illuminating. I’ll leverage this discussion into an article, so the my time researching will be well spent.
Here’s the population numbers for the salient decades:
********1990*******2000********2010
CA**29,760,000***33,872,000***37,259,000
TX**16,987,000***20,852,000***25,196,000
Percent growth – 1990 to 2010
CA 25.2%
TX 48.3%
https://www.census.gov/population/www/censusdata/PopulationofStatesandCountiesoftheUnitedStates1790-1990.pdf
But perhaps I’m not being fair. Let’s look at the RECENT history of population growth – from 2010 through 2017 (estimated) – the period of time when Texas supposedly stumbled during the “great oil recession of 2015-16” when crude oil prices dropped more than 50%.
During this decade, Texas has been the fastest growing state in the nation – 12.6%.
California is growing at less than half that rate – 6.1%.
National average – 5.5%.
https://en.wikipedia.org/wiki/List_of_U.S._states_and_territories_by_population_growth_rate
HQ, facts can be such troubling things.
What’s fascinating is to realize that in spite of the fast growth of the Texas population – with MILLIONS of economic refugees flocking to the Lone Star State – its unemployment rate has not soared. The most recent figures (March, 2018) show the Texas unemployment rate is 4.0%. CA is 4.3%. The national average is 4.1%.
http://www.bls.gov/web/laus/laumstrk.htm
But the unemployment figure gets even more interesting if you look at the lagging yet arguably more accurate U-6 measure of unemployment (includes involuntary part-time workers), CA (the land of the “gig economy”) is the 6th worst – 9.4% vs. the national U-6 rate of 8.3%.
Texas? 7.8%. Thus CA’s U-6 unemployment rate is 20.5% higher than TX.
http://www.bls.gov/lau/stalt.htm
And then there’s the median household income of Texas vs. California to consider. Californians make more, but adjusted for COL, the median household income in Texas is 32% higher than California. See my new post I just put up – thanks for inspiring me to do the update!
Richard,
Thank you for pointing out that, despite all your doom and gloom reporting, California’s population is still growing faster than the National average. (“California is growing at less than half that rate – 6.1%.
National average – 5.5%.”) Even so, I am not sure that “growing faster” is a good indicator of quality of life. I think many here think we already have too many people.
Why don’t we look at per capita GDP growth instead? This is probably a better indicator and should be a big win for Texas. After all, according to you, all the smart and successful people are leaving California and moving to Texas.. Whoops! In actuality, over the last five years California’s GDP per capita has grown by 12.51% while Texas’ has grown only 11.25%. How do you explain that?
https://www.deptofnumbers.com/gdp/california/
https://www.deptofnumbers.com/gdp/texas/