In the two years since the pandemic erupted, considerable buzz has developed around the idea that the financial industry was leaving New York for Miami. After all, local and state taxes on the richest 1% are much lower in Florida than in the Big Apple – about 9 points lower as a percentage of income – and taxes on the rich are even stronger in the city than in New York State.
As Covid disrupted the urban lifestyle, it appeared that many wealthy people could have been seduced by these tax advantages and left the Big Apple. Some important financiers have certainly taken the plunge. But the buzz around this financial move now seems to be over. In fact, Miami-Dade County’s population declined between 2019 and 2022. What happened?
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Part of the answer is that while New York has also lost some of its population, it is not the hell that many non-New Yorkers imagine. Its homicide rate is half that of Miami and it benefits from other advantages, such as its vast transportation network, which the Florida metropolis lacks. And since life in New York has returned to normal, the city has regained its special status as a place where the very rich can enjoy their fortune.
This may sound petty, but I love the statement a fund manager once made to Bloomberg: “The main problem when you move to Florida is that you have to live there .” Moreover, tax rates are not a determining criterion for the rich in choosing their place of residence. California, for example, where taxes on high earners are higher than New York, is currently seeing a sharp increase in the number of taxpayers earning more than $1 million and an explosion in the number of those earning more than 50 million.
Limits on new construction
Certainly, Florida’s population as a whole is rapidly increasing. But Miami’s sudden stagnation harkens back to the age-old debate over what’s driving so many Americans from the Northeast and California to move to the Sun Belt — a very real phenomenon, even as Miami’s dream of becoming the new New York is looking more and more like a mirage.
The conservatives’ preferred explanation emphasizes the importance of a business-friendly environment, including low taxes on job creators, i.e. the wealthy. Another thesis, however, emphasizes the supply of housing: the Northeast and – especially – California build very little, which results in the prices of housing, purchased or rented, being extremely high there. So low- and middle-income Americans will move to urban areas like Houston or Atlanta, where wages may be lower than in northern cities, but housing is much cheaper.
The problem with the Miami region is that if, like Republican states, it applies low taxes to the rich, it is subject, like Democratic states, to limits on new construction. Which means that it builds approximately the same (low) number of new residential complexes per capita as the New York metropolitan area.
Accessible housing, an engine of growth
As a result, housing is extremely expensive. Rents, for example, are much higher than those in other large cities in the Sun Belt, and not much lower than in New York. And because wages there are quite low, its ratio of median house price to median income is actually higher than in the Big Apple.
So why is Florida as a whole experiencing a population increase? It should first be noted that the rest of the state is nowhere near as expensive as Miami. Who exactly are all these new Floridians? Well, a significant number of them are retirees. Seniors have been coming here for a long time to enjoy the mild winters.
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But today there are many more of them: from 2010 to 2020, the American population as a whole increased by 7.4%, while those aged 65 and over grew by 38.6%.
Everything therefore indicates that it is affordable housing and the aging of the population which are the engines of growth in the rest of the Sun Belt, and not low taxes on the rich. And if Democratic states intend to slow down or reverse their relative decline, their priority should be not to lower taxes on the richest, but to authorize more new construction.
© The New York Times 2023
2023-10-31 05:30:00
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