In times of polarization and social tension, the differences between models and systems are noticeable. The United States is no exception, especially in the economic sphere, where, despite the fact that a free market system, respect for property and economic freedoms prevails throughout the country, each state has sufficient autonomy to add nuances to its legislation and govern according to its own requirements. This is what is happening with Florida and New York, states that are notoriously different: one with a thriving economy and the other that is carrying out an economic suicide.
At present, New York is at the antipodes of Florida. They are poles apart. Not only because the main authorities in one are Democrats and in the other are Republicans, that is almost a minor fact, but also because of the way they deal with almost all their problems.
Cases such as the distribution of the COVID-19 vaccine, economic policies, the handling of the pandemic (confinements versus openness) or the back-to-school conflict are examples of how distant New York and Florida really are.
Tax increases, a progressive suicide planned by New York
It is striking that in the midst of the economic crisis, the increase in poverty, unemployment, the problem of the flight of investors and the fiscal deficit, the only solution of the Democratic authorities is to increase taxes. All of this while facing a pandemic.
According to the latest revelations, New York lawmakers are discussing raising corporate and income taxes in a new way to punish the wealthy.
The Wall Street Journal (WJS) summarized the news as follows: “New York governor Andrew Cuomo and state lawmakers are nearing a budget agreement that would increase corporate and income taxes by $4.3 billion a year and would make top earners in New York City pay the highest combined local tax rate in the country.”
Summarizing the information, New York officials are considering raising state taxes from 8.82% to 9.65% for citizens earning more than $1,000,000; 10.3% for those earning more than $5,000,000; and 10.9% for those earning more than $25,000,000.
In addition, to the state taxes must be added a 3.88% tax that the city levies on the highest incomes, so the tax burden for the wealthiest in New York would be between 13.5% and 14.8%, surpassing California, which is the state that punishes millionaires the most, taxing 13.3% on fortunes exceeding $1,000,000.
WJS sources also revealed that there are plans to raise “New York’s corporate franchise tax to 7.25% from 6.5% through 2023.”
New York in depression
The cold numbers, while not fully reflective of what a depressing situation is, do help to size it up.
For example, the unemployment rate in New York is sky high. “Preliminary figures from the U.S. Bureau of Labor Statistics estimate New York has the second-highest unemployment rate in the country (8.9%), after the state of Hawaii (9.2%), and just ahead of Connecticut and California (8.5%).” reads an article by Mario Marroquin in Iohud.
In his text, Marroquin points out that “an analysis of real Gross Domestic Product by the U.S. Bureau of Economic Analysis estimated that while total real GDP fell by 3.5% in 2020, New York’s real GDP decreased by nearly 6%.”
To these numbers must be added, for example, the drowning of the hospitality sector, where restaurants and hotels are suffering from declining tourism and confinements during the most difficult stages of the pandemic.
In short, New York’s economic recovery looks unmistakably slow; and the market signals do not appear to be the best.
Authorities without effective solutions to economic suicide
Regarding the plan revealed by the WSJ, El American contacted Chris Edwards, director of fiscal policy studies at the Cato Institute and formerly the chief economist for the Joint Economic Committee of Congress. Edwards commented that New York, rather than chasing away its citizens, should learn lessons from Florida.
“The interstate flow of Americans switching states for years has been from high-tax New York to low-tax Florida. New York is committing economic suicide with its hugely bloated government and high taxes,” Edwards explained. “New York and Florida have the same population, but New York is twice as big. New York’s government is hugely bloated.”
On the other hand, Daniel Di Martino, a Venezuelan economist residing in the U.S. and contributor to different American media, told El American that “the Democratic government of New York seems to have the objective of relegating the state to economic irrelevance. Thousands of New Yorkers are leaving the state every day due to lack of opportunities, insecurity, and high taxes. Raising taxes even more will only accelerate this process. Congratulations to the states of Florida and Texas who will get more entrepreneurs and hardworking people because of New York.”
Millionaires flee from New York to Florida
Miami, Florida’s main city, is the one enjoying the bad economic moment that states like New York and California are going through.
The “Magic City” seeks to become the direct competitor of New York by taking away its financial monopoly and of San Francisco by trying to become a Silicon Valley 2.0. Its formula could not be simpler: low taxes, high legal certainty, greater economic freedoms, good business climate and ambitious policies.
And Florida is smiling. Because while they work to attract investment in technology and large financial firms to further their goals, New York authorities are handing them the crown jewels on a silver platter: the wealthy.
Just as ordinary citizens are moving from California to Texas or Arizona, and from New York to Florida, millionaires are also planning their wealth and looking to live where the quality of life is better and the opportunities for doing business are greater.
Instead of making life easier for its millionaire residents, so that they can invest, generating new businesses, jobs and, of course, revenues for the state coffers, New York decides to complicate it with regulations and burdensome tax burdens that scare them away.
If there’s someone who is aware of the exodus of New Yorkers to Miami, that’s Martin Litwak, an Argentinian estate planning lawyer based in Florida, who told El American that the New York authorities’ stance is “pretty silly.”
“There were already rumors of a real estate tax in New York so that people who have a second home in the city end up paying more taxes. That tax burden, even though I don’t like it and it’s pretty bad, on balance, is much more reasonable than this increase,” Litwak argued, explaining that the former makes more sense because “people who have a second home in New York are going to keep traveling because it’s a mecca-type city and I don’t think people will sell the apartments because of this additional tax.”
On the other hand, “this other tax, which is an income tax, in times of mobility and pandemic is really silly; because those who love New York are going to live in the outskirts of New York and this tax will not reach them and those who do not love New York so much will not meet the minimum residency requirements and will not pay taxes”.
The lawyer explained that this “is a tax burden that can be easily avoided by changing residency to another state or city”, and that he does not believe that they will get much out of it. In addition, he commented that the authorities “are going to end up driving the most successful people out of the city who are already coming from New York, especially to Miami.”
According to reports, over the past year, Florida has been receiving nearly 1,000 people per day who have packed their bags to flee the most inflexible tax regimes in the U.S., especially from northern states like New York.
The equation, although the Democrats do not want to accept it, is very simple: Florida is smiling in the face of the economic suicide of the New York authorities. The state, today governed by Ron DeSantis, will continue to receive millionaires, investment and will continue to grow in the technological and financial sectors. The Democrats will have to, somehow or other, look for more creative solutions to solve the economic problems in their states. Will they do it?