Voting With Your Feet: Entrepreneur Quits New York

Permit me to introduce you to Tom Golisano, founder and board chairman of Paychex, Inc. His hard work through the years and a bit of luck has made him a wealthy and successful man and one of the pillars of New York society. He loves New York, but he is pulling up stakes, leaving New York and heading to Florida. Why? Because the out-of-control spending, and the spate of new taxes and tax increases imposed by Governor Patterson and the State legislature to pay for it, have simply made it far too expensive for him to remain there. Golisano, one of the wealthy job-creators whose taxes support the State of New York, is withdrawing that support and voting with his feet. In an open letter to the New York Post, he makes his feelings very clear:

I LOVE New York. But how much should it cost to call New York home? Decades of out-of-control budgets, spending hikes and relentless borrowing have made New York simply too expensive.

Politicians like to talk about incentives -- for businesses to relocate, for example, or to get folks to buy local. After reviewing the new budget, I have identified the most compelling incentive of all: a major tax break immediately available to all New Yorkers. To be eligible, you need do only one thing: move out of New YorkState.

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.

How did the state get to this point? By spending, spending and spending some more.

  • New York's budget was $72.7 billion in 1999. Ten years later it ballooned to $131.8 billion. Each year, on average, the budget has risen at an astounding 6 percent compounded annual rate -- more than double inflation (2.8 percent).
  • Medicaid spending alone works out to $2,283 for every man, woman and child in the state. That's the highest in the nation and twice the national average. In the last decade, the Medicaid budget grew 50 percent (from $30 billion in 1999 to $45 billion in 2009). In almost every sector (hospitals, nursing homes, medicine, clinics and home and community care), spending per recipient regularly exceeds the national average.
  • Faced with escalating costs and diminishing returns, Albany and its allies -- that is, the health-care unions (SEIU Local 1199 has more than 300,000 members, many of whom are politically active) -- have only one answer: increase taxes.
  • New York spends the most, per pupil, in the nation on education. Our education spending is 63 percent above the national average. Costs went up about 70 percent in the last decade (from $12.7 billion in 1999 to $21.8 billion in 2009).
  • Like health care, education is something worth spending on and worth investing in, but we're spending more and getting less. New York City schools graduated only 54 percent of high-school students in 2007; Buffalo, just 47 percent, and Rochester 39 percent. Why do we keep spending more? Perhaps it's because New York teachers unions spend millions convincing Albany to spend more. And when faced with potential cuts, the union and its allies had one response: increase taxes.

Nor is it just Albany. After all, local governments tax, too. In New York, the average total state and local tax burden is $5,260 for every man, woman and child. That's by far the highest in the country. And like Albany, when faced with problems, municipalities have one answer: increase taxes.

Upstate New York has been particularly hard hit. Add unreasonable real-estate taxes to uncontrolled state spending, and you wind up with whole communities decimated. An unworkable assessment process compounds the problem further. The result: Fifteen of the 20 highest-taxed counties in America are right here in Upstate New York. While homeowners in other areas build equity, we just pay more taxes.

This problem didn't begin with the current recession. New York faced a $6 billion shortfall before the economic downturn. However, in the face of economic turmoil, Gov. Paterson, Assembly Speaker Sheldon Silver and Senate Majority Leader Malcolm Smith looked to the unions and special interests, who answered with one voice: raise taxes.

That was irresponsible -- and may just prove to be counterproductive, since the top 1 percent of earners account for about 50 percent of state revenue and are the ones who can and will leave. Among other hikes in taxes and fees, they raised the marginal tax rate on the most successful (and most mobile) New Yorkers to 8.97 percent, the second-highest rate in the nation.

Bottom line? By domiciling in Florida, which has no personal-income tax, I will save $13,800 every day. That's a pretty strong incentive.

Like I said, I love New York. But I'm not going to pay any more for the waste, corruption and inefficiency that is New York state government.

It seems pretty straightforward: A person who creates jobs and adds value is leaving the community because it is no longer economically sensible for him to remain and the State is the poorer for it. This is something that taxing politicians never seem to understand: the people with the money will protect that money, even to the point of moving from high-tax jurisdictions to low tax jurisdictions.

Also, unless a business is strictly local, so can business owners. Given the electronic nature of our financial industry, it would not be difficult at all for many businesses to pull up stakes and headquarter where the grass is greener. Sometimes others will take the place of the departed, sometimes not, but it has always been true that money votes with its feet. People who are successful prefer to keep their earnings rather than subsidize bloated government, whether that is on the local, state or federal level. On the local level, it is no news that high-tax cities like Chicago and New York City have seen people and jobs drain away as the burden of government is increased. If Governor Quinn’s 50% tax increase is passed in Illinois, you will see people leave the state, especially entrepreneurs, the job creators, who have the means to set-up elsewhere.

It is no surprise that out of control spending leads to out of control taxation and the resulting exodus, but now we are facing that on a national level. Will that mean that companies with the means will go offshore? We are already seeing that in the energy sector. It takes little imagination to see it coming in other sectors of the economy as well. After all, if all the various governmental entities are taking as much as 50% or more from your revenue, then why are you working so hard? Where is your incentive? That is where Mr. Golisano was, questioning why he should remain in a place where so much of his income was being taken by government.

His solution was to move, like so many others before him, and so many others yet to go. That leaves those who remain to shoulder the additional burden as more tax revenues will be needed to make-up the shortfall of the lost taxes. It means more businesses close, which leads to more unemployment, further shrinking the tax rolls but padding the rolls of people on government aid and that leads up to a vicious spiral to ruin. We see it in Michigan, and are seeing it begin in New York and are likely to see it in Illinois before the year is out. But it doesn’t need to be this way.

The Bottom Line

The government is too big—every level of government—and it is sucking the life out of American business and American life. It was too big under Clinton, far too big under Bush and is growing at a rate usually associated with the monster in a Japanese sci-fi flick. It is also doing things our founders never intended government to do—things it has no business doing—and the cost of that bloated corpulance, borne of a split between our government and the US Constitution, is disastrous. It is not an issue of preferring Hamilton’s Federalism to Jefferson’s Democratic Republicanism, but rather John Madison’s middle path between the two, the path that keeps the federal and state governments within their proper spheres and emphasizes the prosperity of the American people over the power of government.

To do that, the people have to rein in their governments on every level. America can no longer afford ignorant voters; it can no longer afford a government that acts beyond its rightful place. Politicians need to hear from you, from me, from everyone that their number one job is to help you prosper, and that begins with you keeping more of your hard-earned money. The wealthy already pay their fair share, and my fair share and your fair share, too. How about everyone pays their fair share? Instead of a tall, narrow tax structure that is balanced on the checkbooks of people who can leave and take their money with them, spread it out to all but the most destitute and make it low and fair for all.

New York has no business driving people out of the state for financial reasons, and only because of a wide-spread yet horribly misguided ideology are they doing so. Our founders foresaw the situations we are facing today that directly result from that ideology, they saw them as clearly as if they had a crystal ball, and they gave us a foundational document—the Constitution—written specifically to head these problems off. It is time to reacquaint our government with its foundation. If it’s been a while since you read it, visit the Constitution of the United States and explore. You might be surprised by what you find.

Then contact your legislators and demand change—real change—the kind you can believe in!