(The Center Square) – New York City lost nearly 5,000 businesses early last year as employers closed their doors or left for other low-tax states, according to a new report.
The analysis comes as newly elected Mayor Zohran Mamdani pushes to hike business taxes to foot the bill for his agenda.
The report, released Thursday by the Economic Development Corporation, showed more than 3,500 new businesses opened their doors in New York City during the second quarter of the fiscal year but that was offset by a loss of about 8,400 employers. That’s the weakest quarter for business formation since the height of the COVID-19 pandemic, the report’s authors said.
The corporation’s report is the latest to highlight New York City’s shrinking business sector with employers looking to other low-tax states as Albany piles on new regulations and costs.
It also comes as Mamdani seeks to draw up support for higher taxes to pay for plans for universal childcare, tuition free college and free bus service in the city.
Mamdani’s plans call for increasing the state’s top corporate tax rate by about half, up to 11.5% from its current maximum of 7.25%, which has caused concerns among New York City’s business community. If approved, that would match the highest corporate rate in the nation next door in New Jersey. He’s also called for “wealth” tax and a $30 per hour minimum wage for the city.
That has fueled concerns about an exodus of major employers from the nation’s largest city, with low-tax states like New Hampshire and Florida urging New York City businesses to relocate.
A September report by the Public Policy Institute of New York State found that 72% of 500 employers surveyed don’t think the state’s economic conditions are good, and only 21% believe the state is on the right track. The group said its analysis suggests that New York has lost its competitive edge, ranking 50th in the nation for both outmigration and taxation during the 2020-22 period covered by the report.
Many business leaders surveyed for the institute’s report said New York’s taxes and regulations make it too expensive and difficult to run a business. The Empire State has more 300,000 regulations on the books, and employers surveyed wanted fewer state and local regulations and lower business taxes from the state, according to the report.
In 2023, New York’s effective state business tax rate was 5.9%, making it the ninth-highest in the nation, the report’s authors noted. The state also ranks poorly for individual income, sales, property and unemployment insurance taxes. It has the fourth highest percentage of housing-burdened households in the country, with 38.6% of households spending more than 30% of their income on housing.
Those factors have contributed to outmigration, with New York losing more domestic taxpayers than any other state from 2020 to 2022, according to the report, as residents fled to New Jersey, Florida, and other low-tax states.
