A Higher Corporate Tax Rate Would Cost New York Jobs, Businesses

Exxon Mobil traces its roots in New Jersey all the way back to 1882, when John D. Rockefeller founded Standard Oil of New Jersey.  Next month, after 144 years in the state, Exxon Mobil shareholders will formally vote to move the company out of the state to Texas.

This move by Exxon Mobil is just the latest example of the unprecedented movement of major U.S. companies from high-tax states to low-tax states.  It should send a loud clear message to New York politicians in Albany and New York City.

With a corporate tax rate of 11.5%, New Jersey has the highest corporate tax rate in the country, imposing a combined federal-state tax rate of 30% on companies in the state, one of the highest tax rates in the world.  Jobs and companies are leaving the state.  Yet despite what is happening right next door, New York and New York City are considering raising their corporate tax rates to an even higher level. 

Lawmakers in New York are considering raising their state corporate tax rate to 9.25% and the New York City tax rate to 10.5%, for a rate of nearly 20% on companies in New York City.  Combined with the 21% federal tax rate, businesses in the City would face a rate approaching 40%, the highest corporate tax rate in the developed world.

If these higher rates are enacted, New York would likely see more companies and good-paying jobs move to low-tax  business friendly states, which is just what states like New Jersey, Illinois, and California have experienced.

New Jersey has lost some of its largest employers, with major companies fleeing its high corporate rate.  In recent years, the state has lost one-third of its Fortune 500 companies. 

Illinois has the third highest corporate tax rate, and it has seen a steady exodus of companies.  Major companies such as Citadel, Boeing, and Caterpillar have left the state, with Citadel CEO citing the state’s “job-killer tax” as one of the reasons for their move to Florida.

California has one of the highest corporate tax rates and the highest personal income tax rate.  Major companies such as Chevron, founded 145 years ago, and Hewlett-Packard, one of the first Silicon Valley firms founded nearly 90 years ago, have left the state.  Oracle, Tesla, and Palantir are among other firms that have left.

The lesson for New York is that taxes do matter.  New York City is the world’s financial center, but its financial services firms are under intense pressure to move to low-tax states, especially Texas and Florida.  Texas has no income or corporate tax, and it has amended its constitution to ban capital gains, estate, and securities transactions taxes to attract businesses to the state.  It has surpassed New York as the state with the most financial services employees.  JP Morgan now has more employees in Texas than in New York.

Florida, with no state income tax and a low corporate tax, is calling itself Wall Street South, and has seen major financial firms relocate to the state.  Wells Fargo, Goldman Sachs, and many others have moved operations and employees out of New York to Florida.  Apollo Global Management is planning a major expansion and a new second headquarters in either Florida or Texas.

New York tax rates are already too high.  New York City should not risk its future as the world’s financial leader.  Raising tax rates even higher would just accelerate the flight of companies and jobs out of the city and the state.