The Cost of New York
September 16, 2014

New York imposes other strains on non-wealthy residents in the form of additional heavy business taxes and fees and intrusive business regulations. These measures curb job growth—above all, in middle-income occupations—and make it tough for new firms in the city to survive, let alone flourish and provide their owners with an entrepreneurial route to the middle class. The IBO study found that New York levies business taxes at nearly double the average found in other big cities—$1.06 per $100 in taxable income, compared with 55 cents per $100.

Property taxes for office buildings take a huge bite. On average, New York City charges Manhattan firms that rent office space $15 a square foot just in real-estate taxes, according to research by Savills Studley. By contrast, property taxes for office tenants in Chicago’s main business district average $8 per square foot, in San Francisco just $5 per square foot, and in Dallas $2 (see Figure 2). In nearby suburban New Jersey, a direct competitor with New York for many middle-income office jobs, the tab is just $2.50 per square foot. A modest-size firm employing 400 and renting 100,000 square feet of space will pay, on average, $1.25 million more in property taxes in New York than it would in suburban New Jersey. This occupancy bill is a major reason that middle-income jobs are disappearing from Gotham, a report last year by the New York City Partnership found. Since 2008, New York has lost 91,800 middle-wage jobs (see Figure 3). Most of those jobs disappeared during the recession that stretched from 2008 through 2010 in New York, true; but the city has kept losing them during the subsequent recovery, even as other sectors of the economy have bounced back. Companies remain willing to keep their highest-paid executives in New York because those workers thrive in a global business capital, and low-income jobs for unskilled workers follow because the city still needs service workers—those employed by restaurants, retailers, and hotels—to provide basic amenities. But companies derive little payoff from keeping middle-income jobs in pricey New York when technology allows them to situate these positions in less expensive locales.

The Cost of New York

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