New York State’s Midlife Crisis

10:34 am, 11/11/09

Democratic New York Governor David Paterson's campaign ad, last week:

"When you become governor, you learn you will make mistakes," the narrator says of Mr. Paterson. "But in the depths of an historic recession, you take what you have learned and have the strength to do what's right for the people of New York."

Paterson, this week:

Paterson: NYS Will Be Broke Before Christmas - Says Only Way To Fix Problem Is To Have Immediate Cuts To Education, Hospitals

I wonder what he learned.

Paterson, already unpopular for his proposed tax on everything New Yorkers like ("sporting events, alcohol, Internet downloads, shopping, taxis, soda, movie tickets, cable TV") to be levied against what are already some of the most overtaxed people in the nation, certainly hasn't learned much from the mass exodus out of the state.

More than 1.5 million state residents left for other parts of the United States from 2000 to 2008, according to the report from the Empire Center for New York State Policy. It was the biggest out-of-state migration in the country.

The vast majority of the migrants, 1.1 million, were former residents of New York City -- meaning one out of seven city taxpayers moved out.

What's worse is that the families fleeing New York are being replaced by lower-income newcomers, who consequently pay less in taxes.

Paterson's "emergency response" to the state's ongoing and worsening situation has consistently been to try to raise taxes on the increasingly smaller (and increasingly poorer) tax base, while simultaneously cutting the services that working New Yorkers depend on.

It shouldn't require empirical evidence to realize that this is a terrible idea, but the Manhattan Institute's City Journal did the research anyway, focusing on comparisons between California (in a similar boat) and Texas.

Unpacking the numbers is even more revealing - and, for California, disturbing. The biggest contrast between the two states shows up in "net internal migration," the demographer's term for the difference between the number of Americans who move into a state from another and the number who move out of it to another. Between April 1, 2000, and June 30, 2007, an average of 3,247 more Americans moved out of California than into it every week, according to the Census Bureau. Over the same period, Texas saw a net gain, in an average week, of 1,544 people. Aside from Louisiana and Mississippi, which lost population to other states because of Hurricane Katrina, California is the only Sunbelt state that had negative net internal migration after 2000. All the other states that lost population to internal migration were Rust Belt basket cases, including New York, Illinois, New Jersey, Michigan, and Ohio.

As Tiebout might have guessed, this outmigration has to do with taxes. Besides Mississippi, every one of the 17 states with the lowest state and local tax levels had positive net internal migration from 2000 to 2007. Except for Wyoming, Maine, and Delaware, every one of the 17 highest-tax states had negative net internal migration over the same period. Conservative researchers' technical explanation for this phenomenon is: "Well, duh." Or, as Arthur Laffer and Stephen Moore wrote in the Wall Street Journal earlier this year: "People, investment capital and businesses are mobile: They can leave tax-unfriendly states and move to tax-friendly states."

At this point, defenders of the high-benefit, high-tax paradigm push back. Remember the other half of Tiebout's equation, they say. There's no need for a state to be like Texas if its high taxes and extensive regulations are part of a package deal that yields more and better public goods and an attractive quality of life.

But that, it turns out, is a big "if."...California is decidedly lacking. The biggest factor accounting for California's loss of population to the other 49 states, bond ratings that would embarrass Chrysler or GM, and state politics contentious and feckless enough to shame a banana republic, has to be its public sector's diminishing willingness and capacity to fulfill its promises to taxpayers. "Twenty years ago, you could go to Texas, where they had very low taxes, and you would see the difference between there and California," Joel Kotkin, executive editor of NewGeography.com and a presidential fellow at Chapman University in Southern California, told the Los Angeles Times this past March. "Today, you go to Texas, the roads are no worse, the public schools are not great but are better than or equal to ours, and their universities are good. The bargain between California's government and the middle class is constantly being renegotiated to the disadvantage of the middle class."

Similarly, the CEO of a manufacturing company in suburban Los Angeles told a Times reporter that his business suffered less from California's high taxes than from its ineffectual services. As a result, the company pays "a fortune" to educate its employees, many of whom graduated from California public schools, "on basic things like writing and math skills." According to a report issued earlier this year by McKinsey & Company, Texas students "are, on average, one to two years of learning ahead of California students of the same age," though expenditures per public school student are 12 percent higher in California.

Texas, the article suggests, focuses their resources on the fat tail services that benefit the overwhelming majority of Texans, while California squanders huge sums placating narrow special interest groups like public service unions.

Even billionaire activist Tom Golisano finally gave up and formally emigrated to Florida, making essentially the same point in a farewell editorial piece.

Last week I spent 90 minutes doing a couple of simple things -- registering to vote, changing my driver's license, filling out a domicile certificate and signing a homestead certificate -- in Florida. Combined with spending 184 days a year outside New York, these simple procedures will save me over $5 million in New York taxes annually. By moving to Florida, I can spend that $5 million on worthy causes, like better hospitals, improving education or the Clinton Global Initiative. Or maybe I'll continue to invest it in fighting the status quo in Albany. One thing's certain: That money won't continue to fund Albany's bloated bureaucracy, corrupt politicians and regular special-interest handouts.

Paterson didn't create this mess, but now that the engines have gone out, he certainly seems intent on piloting the plane the rest of the way into the mountainside. Perhaps emblematic of this are the horrible new New York license plates, revealed today, which are so hideous that it may serve to keep people from leaving New York simply so they won't be laughed at by motorists in other states.


As the New York Times explains, forcing drivers to get the new plates isn't just a mere fundraising scheme.

No, the design is meant to "reflect New York's force and its resilience."

I'm confused, too. Apparently, this is accomplished by going retro and imitating the horrible look of the New York license plates of the late 1970s. After all, the 1970s were such a good time for New York City.

The 1970s were a low point in city history as a fiscal crisis almost pushed it into bankruptcy, crime rates soared, and homeless people crowded sidewalks as public services crumbled.

Almost a million people fled New York's Mean Streets during the decade for the safer, more stable suburbs, a population decline that took more than 20 years to reverse.

Now, the whole state gets to relive Carter-era Manhattan. At this rate, New York State is going to quit its job, dye its hair, divorce its wife, and buy a motorcycle before New Year's.