New York City facing exodus after officials hike taxes to plug Covid-19 shortfall

New York is bracing for an exodus of its wealthiest residents after officials passed a budget that will see them pay the US’s highest tax rate, as they desperately seek to boost their Covid-hit economy.

Under the new rate, which is expected to soon be rubber-stamped by Governor Andrew Cuomo, the city’s top earners could pay up to 14.8 per cent tax - a combined federal, state, and city tax which could reach 52 per cent.

The move sees the state overtake California, which has the current highest combined tax rate for top earners in the US, and much of Europe.

Business leaders and CEOs this week warned that the increase is likely to backfire by driving away the very people and companies the city relies on for its revenue.

“Bell Tolls for NYC: Quality of life plummets, taxes rocket - and city faces uncertain future”, read the headline on the front page of the New York Post tabloid on Wednesday.

Francis Suarez, the mayor of Miami, Florida, which does not tax personal income and has one of the lowest corporate rates in the country, said this week that some of New York’s biggest firms have been in touch.

“I can’t give names but if you’re looking to know if we’re talking to the biggest in New York, we are,” he said. “Clearly, the toxic climate in New York has led businesses to look to Miami as an attractive place for long-term expansion and relocation.”

A recent study showed that at least 20 per cent of banks and financial services firms have thought about relocating workers to other locations outside of New York. Dozens already have.

Much of Wall Street has become a ghost town, while restaurants and high-end shops in Midtown Manhattan that closed with lockdown are still boarded up and unlikely to return.

Kevin Couper helped set up a satellite office for his wealth management consultancy Weathspire in Boca Raton, southern Florida, after they decided to relocate New York staff.

“It was night and day moving to Florida - no state income taxes, lower cost of living, better weather,” he told The Telegraph. “It’s just a smart move for businesses and anyone who wants to spare themselves the huge financial hit.”

The wealthiest two per cent of New Yorkers contribute half of the city’s revenue. However, many of them fled at the start of the pandemic.

New York was the number one state for population loss in the US last year, according to Census Bureau data. More than 300,000 New York City households in higher-income neighbourhoods filed change-of-address forms, resulting in the largest decline in property tax receipts in nearly 25 years.

Some have returned, but many more have stayed away.

Local Republicans senators protested the budget, saying the “unsustainable” level of taxation could also drive young New Yorkers and opportunities away from the state.

“We did not see these really big challenges to the city’s financial stability even after 9/11 and the financial crisis,” said Edward Skyler, head of public affairs at Citigroup and a former deputy mayor, suggesting there was no easy fix.

Mr Cuomo, a Democratic and fiscal centrist, had for years fought the progressive wing of the state legislature, believing a tax hike would be counter-intuative. However, facing mounting allegations of sexual harassment and a $1billlion funding gap caused by the pandemic, the third-term governor has been forced to yield on everything from taxes, to spending, to charter schools and criminal justice.

Meanwhile, wealthy Americans across the country are facing the threat of the federal corporate tax rate going up under President Joe Biden’s administration.

Mr Biden has declared he wants to raise the corporate tax rate to 28 per cent, as well as hiking taxes on those earning over $400,000 (£265,000) in order to pay for his $3 trillion infrastructure plan, saying it was time for companies like Amazon to pay their “fair share”.

“Only time will tell whether New York will ever recover,” said Mr Couper. “It’s not an easy city to forget and Florida could end up just being flavour of the month. We’ll see.”

Read more: From New York City to Nashville: Americans fed up of cramped cities flee in droves during pandemic