Yes, I know. New York State, once on the cutting edge of American invention and industry, has been losing business, especially manufacturing, to the Sunbelt and other far-off places for decades. We're not the special place we once were when our transportation advantages mattered, and New York City often seems like the main place in the state whose critical mass keeps it moving forward. Low-tax states are the ones seeing all the new business development, right?
Well, it's not that simple. California and Massachusetts have maintained thriving high-tech corridors despite their being high-tax states. (Remember "Taxachusetts"?) While low taxes could be a plus for those already making profits, there are a lot of other factors that go into centers for innovation. Communities of people with the right training, both in business and in tech, are central, and while having a large employer can be a good thing, a broader ecosystem of smaller companies makes it easier to sustain community in fields where even great ideas don't always make it.
I've never really thought of New York as playing on the same field as California and Massachusetts, though there was certainly a boom in New York City's "Silicon Alley" when the dot-com boom was taking off, and Tompkins County, though far from urban centers, has long had a lot of entrepreneurial energy flowing out of and around Cornell. Venture capital comes here from afar, and I understand there's also been some substantial local venture capital as well.
It turns out that in terms of venture capital investment per capita, New York State isn't California or Massachusetts. No other states really are. However, in 2007, we were #14. For the longer 2005-2007 period, we were #3, and for 2003-2007 we were #5. (Delaware somehow jumped ahead of California and Massachusetts in 2003 and 2004.)
For a state that dreams of returning to Empire status, but constantly imagines itself to be collapsing, that's a rare positive sign. There's a lot more information on the detail page for New York, and the site where this came from has a lot more detail on the ups and downs of venture capital.
One other interesting aspect of this is that I found the data through a blog post complaining about the low level of investment in Illinois, another state with similar polarities to Upstate-Downstate and a city (Chicago) that seems unlikely to slow down easily. Somehow, though, we're outpacing them easily by this measure.
(And I wonder if part of the reason we haven't caught up with California and Massachusetts is that our universities are widely dispersed, rather than concentrated in places where they can be mutually reinforcing. I like that they're dispersed, but when I look at the competition, concentration seems to help.)
Posted by simon at September 25, 2009 4:54 PM in economy
"Well, it's not that simple. California and Massachusetts have maintained thriving high-tech corridors despite their being high-tax states."
The taxes in those states as a share of their residents personal income are much lower than in NYC. I compile data from the Governments division of the U.S. Census Bureau each year, and can attest to that. Just go back to my Room 8 posts from mid-2008 and you can see the FY 2006 data.
I'm waiting for 2007 data, which is a census year, when more detailed data is available.
It isn't just the taxes, it's what you get for them. We're screwed there too.