According to a recent report by New York City's Economic Development Corporation, the number of businesses in New York City has decreased by almost 5,000 from last spring. This marks the largest decrease since the COVID-19 pandemic caused a shutdown of the city's economy.
The Economic Development Corporation released this report on Thursday last week and it shows that during the second quarter of the financial year 2025, there were more than 3,500 new businesses opened throughout New York City while also losing about 8,400 employers during that same period.
Newly-elected Mayor's plans
This analysis comes as newly-elected Mayor Zohran Mamdani's pushes for an increase in business taxes to fund his agenda of providing universal childcare, tuition-free college and free bus services in the city.
Mamdani's proposal is to significantly raise the maximum corporate income tax rate in the state by approximately 50 per cent, from its current high of 7.25 per cent to 11.5 per cent. His proposal has raised concerns among the business community in New York City.
If his proposal is approved, it would result match the highest corporate rate in the nation next door in New Jersey. Additionally, Mamdani has proposed establishing a "wealth" tax and raising the minimum wage in New York City to $30 per hour.
It is believed that this will cause many of the major employers based in New York City, the largest city in the United States, to relocate to states with more favorable tax rates, such as New Hampshire and Florida.
Is New York headed on the right path?
According to a report released in September by the Public Policy Institute of New York State, 72 per cent of the 500 employers they surveyed stated that they do not believe that New York State has favorable economic conditions, while only 21 per cent of the respondents feel that New York is heading in the right direction.
Based on its review, the group estimated that New York has lost its position as a leader in the marketplace. For the two-year period 2020 to 2022, New York State ranked 50th for both outmigration and tax burdens among all states in the United States.
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The Institute's report surveyed thousands of business leaders and concluded that New York state's regulations and taxes make it prohibitively high and difficult to conduct businesses. The current laws of New York state, comprising over 3,00,000, as well as employers' requests for fewer restrictions and lower rates of taxation, clearly indicate the need to change current policies.
Why the out-migration?
According to the report's authors, the effective state business tax rate in New York in 2023 was 5.9 per cent, which is ranked as the ninth-highest state business tax rate in the country. They also found that New York has a poor ranking on the individual income tax, sales tax, property tax and the unemployment insurance tax.
New York has the fourth-highest percentage of housing-burdened households in the nation, which is defined as those with a cost-burdened percentage of greater than 30 per cent, with 38.6 per cent of total households in New York having this designation.
All of these conditions have resulted in substantial out-migration from New York to other states, particularly those with lower tax rates. In fact, according to the report, New York lost more domestic taxpayers than any other state during the period from 2020 through 2022, with many New Yorkers relocating to states such as New Jersey, Florida and Connecticut.
