How high taxes and regulation are killing one of the most prosperous states in the nation
Upstate New York is becoming Detroit with grass.
Binghamton, New York — once a powerhouse of industry — is now approaching Detroit in many economic measures, according to the U.S. Census. In Binghamton, more than 31 percent of city residents are at or below the federal poverty level compared to 38 percent in Detroit. Average household income in Binghamton at $30,179 in 2012 barely outpaces Detroit’s $26,955. By some metrics, Binghamton is behind Detroit. Some 45 percent of Binghamton residents own their dwellings while more than 52 percent of Detroit residents are homeowners. Both “Rust Belt” cities have lost more than 2 percent of their populations.
Binghamton is not alone. Upstate New York — that vast 50,000-square mile region north of New York City — seems to be in an economic death spiral.
The fate of the area is a small scene in a larger story playing out across rural America. As the balance of population shifts from farms to cities, urban elites are increasingly favoring laws and regulations that benefit urban voters over those who live in small towns or out in the country. The implications are more than just economic: it’s a trend that fuels the intense populism and angry politics that has shattered the post-World War II consensus and divided the nation.
“Basically what you’ve got in New York is a state tax code and regulatory regimen written for New York City,” says Joseph Henchman, vice president for state projects at the Tax Foundation in Washington. “Legislators say, `Look, New York is a center of world commerce. Businesses have to be here. It doesn’t matter how high we tax them.’ I hear that a lot. But when you apply that same logic to upstate, the impact is devastating.”
The lives of Bill and Janet Sauter, brother and sister, sum up the sad story of upstate New York. They grew up in the Long Island suburbs. He went to Clarkson College in Potsdam, N.Y., near the Canadian border, studied software and enjoyed a highly successful career in Texas’ oil industry.
Janet went upstate too, marrying a minister and settling in rural East Chatham, 30 miles south of Albany. In 1999, she and her husband wanted to move to Texas to be closer to their daughter. But they couldn’t sell their home. Months passed without a single inquiry. For Janet, there was no escape from New York. Her neighbors had similar experiences, she said.
Bill is now retired and living in Steamboat Springs, Colo., where he skis at every opportunity — while Janet and her husband Bob are trying to eke out a living in what has become one of the poorest regions in the country. “There just isn’t much work around here,” says Janet, who supplements her husband’s income by working all night in a home for the elderly. “I’m lucky to have this job.”
Industry has fled upstate New York. “In 1988, Kodak employed 62,000 people in Rochester,” says Sandra Parker, president of the Rochester Business Alliance. “Today it employs 4,000. Xerox has moved most of its people out while Bausch & Lomb, which was founded in Rochester in 1858, has left entirely.”
As a result, Rochester is now the fifth poorest city in the country, with 31 percent of the population living in poverty. Buffalo is right behind at No. 6 (30 percent).
Syracuse was devastated when Carrier, the nation’s largest manufacturer of air conditioners, General Electric and auto-parts manufacturer Magna International shuttered their last manufacturing plants in Onondaga County. A Wall Street Journal survey of the nation’s 2,737 counties, shows that only nine other counties have suffered greater job losses per capita than Onondaga County since 2009.
Bob and Janet Sauter were not alone in their desire to leave New York for more prosperous parts of the country. New York state has lost 350,000 people in the past three years, according to the Empire Center for New York State Policy, an Albany-based research group. This is the largest out-migration of any state.
New York was the most populous state in the union in 1960, with 45 representatives in Congress. By 2012, New York fell to third place and its congressional delegation plummeted to 28. The 2020 Census will likely cost New York even more congressional seats. Without the hundreds of thousands of immigrants moving into New York City, the state’s depopulation would be even greater. A remarkable 36 percent of New York City is foreign born — twice the percentage in 1970….
The city of Buffalo tried to disincorporate itself in 2004, so it could shift its Medicaid burden onto surrounding Erie County. The state wouldn’t allow it. It’s probably just as well, say county officials. “Our entire property tax goes to supporting Medicaid,” says Erie County executive Mark Poloncarz.
States generally have three potential sources of revenue: the income tax, the sales tax and the property tax. “Usually a state will concentrate on one and go low on the other two,” says Joseph Henchman of the Tax Foundation. “New York is in the top six states for all three.”
The Tax Foundation rated New York dead last among the 50 states for business climate in 2013.