New York Businesses Are Fleeing Wall Street. Blame Bad Policy.

High taxes, high crime, and a brazenly corrupt legal system are all taking their toll on the Big Apple. Between July 2020 and July 2023, New York State led all 50 states in population loss in percentage terms at 2.65 percent with its population declining by 533,494 — a loss that can be attributed almost entirely to people leaving New York City. During the same three-year period, New York City suffered an even greater loss at 6.20 percent with a massive decline of 546,164 residents — slightly more than New York State as a whole.

People are leaving New York City in droves, but so are businesses and capital. Bloomberg reported last year that for the three years, from 1st quarter of 2020 through 1st quarter of 2023, 158 investment firms with a whopping $993 billion of assets under management moved out of New York City to other states; 56 of these firms have relocated to Florida with others having moved to low-tax, business-friendly states such as North Carolina, Tennessee, and Texas. (READ MORE: Pollster Says Trump Has a ‘Legitimate Shot’ at Winning New York)

A survey conducted in 2021 by the Partnership for New York City of “major employers” found that nearly a quarter of financial services firms plan to reduce their New York City workforce within five years. Several prominent Wall Street firms have transferred some of their operations out of New York in recent years, including Citigroup, Goldman Sachs, Morgan Stanley, Barclays, UBS, and AllianceBernstein.

Two of the largest and most successful hedge funds, Icahn Capital Management under billionaire Carl Icahn (estimated $22 billion under management in 2023) and Elliott Management led by fellow billionaire Paul Singer (estimated $59 billion under management in 2023), both moved their businesses out of New York to Florida.

Why Leave the Big Apple?

One major factor for the flight out of New York City is taxes. New York State has a highly progressive income tax for individual taxpayers ranging from 4.0 percent to 10.9 percent with its top marginal tax rate the third highest in the United States. But it’s worse for New York City residents who suffer an additional city income tax ranging from 3.078 percent to 3.876 percent. The top marginal individual income tax rate for New York City residents is 14.776 percent, the highest combined state and local income tax rate in the nation. The Tax Foundation conducted an analysis of the business tax climate for each state in 2024. Its analysis ranked New York 49th out of the 50 states with only New Jersey ranking worse.

Escalating crime is also causing residents and businesses to leave. Over the past decade, the city has been run by two consecutive far leftwing Democrat mayors: Bill de Blasio and Eric Adams. Their weak-on-crime positions have been exacerbated by the consecutive tenures of two highly political Democrat district attorneys for New York County: Cyrus Vance, Jr. and Alvin Bragg. District Attorney Alvin Bragg was elected in November 2021 with substantial financial help from radical socialist billionaire George Soros who donated $1 million to the Color of Change PAC, which supports the defund-the-police movement and backed Bragg’s campaign. (READ MORE: Nostalgia Is Coming Back to New York City)

Over the past five years, assaults and homicides in the city’s subway system are at historic highs as indicated by recent data reported by Bloomberg.

A new motivation for businesses to leave the city is the two politically-driven lawfare cases against Donald Trump in New York — one initiated by New York State Attorney General Leticia James and the other by Manhattan District Attorney Alvin Bragg.  Both cases have been severely criticized by well-respected legal experts, including Alan Dershowitz and Jonathan Turley, as abuses of the New York legal system. The cases have also been denounced by prominent members of the investment community, including Kevin O’Leary, who warned that there could be negative business consequences for New York and possibly even the United States as a national investment destination for global businesses. (READ MORE: Alvin Bragg Is as Corrupt as the New York Robber Barons)

Could Texas Replace New York

The negative factors affecting the investment environment in New York City have led to the investment community seeking geographic alternatives to the expensive and restrictive stock exchange duopoly of the New York Stock Exchange and NASDAQ on Wall Street.  Two of Wall Street’s biggest players, Black Rock and Citadel Securities, and more than 20 other investment groups are backing the establishment of a new stock exchange in Dallas, TX — the Texas Stock Exchange (TXSE). The proposed new stock exchange announced its plans recently:

TXSE Group Inc. announced today that it plans to launch the Texas Stock Exchange (TXSE), headquartered in Dallas. TXSE will focus on enabling U.S. and global companies to access U.S. equity capital markets and will provide a venue to trade and list public companies and the growing universe of exchange-traded products. TXSE will be a fully electronic, national securities exchange that will seek registration with the U.S. Securities and Exchange Commission.

TXSE Group Inc. successfully completed its initial capital raise with participation from more than two dozen investors, including some of the largest financial institutions and liquidity providers in the world, such as BlackRock and Citadel Securities, as well as prominent business leaders from around the country.

The liquidity providers backing TXSE Group Inc. represent a significant portion of the equity volume on U.S. lit exchanges and together comprise a majority of all U.S. listed retail volume. With approximately $120 million of capital raised, TXSE is expected to be the most well-capitalized exchange entrant to file a registration with the U.S. Securities and Exchange Commission.

TXSE’s planned launch comes as changes in the equity markets provide an opportunity for greater alignment and more competition. Corporate issuers and exchange-traded product sponsors are demanding more stability and predictability around listing standards and associated costs. TXSE intends to expand access to U.S. capital markets for all investors, while providing greater access and alignment for public companies and those seeking access to public capital.

“Changes in equities trading markets are driving more volume to exchanges and more choices for issuers and sponsors,” said James Lee, founder and CEO of TXSE Group Inc. “TXSE will ultimately create more competition around quote activity, liquidity and transparency, resulting in more consistent and reliable markets that benefit investors, global issuers and liquidity providers alike.”

The Wall Street Journal reported on the new Texas challenge to Wall Street on June 6:

New York politicians, watch out. A new stock exchange based in Texas could soon challenge Nasdaq and the New York Stock Exchange—and the Empire State’s status as America’s financial capital….

For years public companies and brokers have complained about high fees at Nasdaq and the NYSE, but they’ve paid up for access to America’s deep capital markets. Even so, the duopoly’s fees have helped drive some 40% of trading volume off the two exchanges, resulting in less liquidity and worse pricing on the exchanges….

Nasdaq has mandated boardroom diversity quotas for companies that list shares on its exchange. Starting this year, they must have a woman, “underrepresented minority” or “LGBTQ+” member—or publicly explain why they don’t. Boards of bigger companies must include at least two “diverse” directors by the end of next year.

Nasdaq’s goal is to shame companies into adopting the political left’s values. The duopoly enjoy nearly carte blanche authority to regulate corporate governance of listing companies, subject to the approval of the SEC. Nasdaq’s diversity diktat has raised concerns about what next could be required. Net-zero climate commitments?

The Texas exchange is also a form of political arbitrage. New York Democrats have long taken Wall Street for granted, imposing punishing taxes and regulation. Progressives in Albany recently threatened to revive a long-dormant stock transfer tax to pay for their migrant and mass transit messes. Go ahead, make the Texas exchange’s day.

This new development of a prospective Texas challenge to Wall Street is the free market at work seeking a solution to a problem. While it will take some time to know whether the upstart Texas Stock Exchange will succeed, it is notable that Wells Fargo, the third largest bank in the United States with over $1.7 trillion in assets, is investing almost $500 million into the construction of a new regional campus in Irving (12 miles west of downtown Dallas) with 850,000 square feet of office space for over 3,000 employees and expected to open by end of 2025.

Steve Dewey is a retired federal financial regulator and managing director of the Bastiat Society of Washington, DC.  He is also the founder of GeoFinancial Trends, LLC, and writes on Substack.

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