In New York–Massachusetts Rivalry, Massachusetts Is Winning

Boston is the top destination for Gotham residents seeking to escape New York's high taxes and regulations.

In the Major League Baseball standings, the Yankees and the Red Sox are battling for the lead of the American League East and for the best overall win-loss record. In Amazon's site-selection contest for its second headquarters, Boston and New York are both finalists. And in a recent report by the real estate technology firm Redfin, New York shows up as a city with a high "net outflow." Boston, Redfin found, was the top destination for Gotham residents seeking to escape.

Five years after I moved from New York to Boston, the rivalry between the two cities — and between the states of New York and Massachusetts — only shows signs of heating up.

This tends to register barely, if at all, for most New Yorkers. If New Yorkers conceive of their city as having any competition, it's with Paris, London, Miami, or Los Angeles, rather than with dear old Boston, home of the bean and the cod.

But New Yorkers ignore their smaller rival at their peril.

As a recent camping trip on the New York side of the Berkshires reminded me, the Empire State and the Bay State share a border. High-profile residents have been moving back and forth for years. Babe Ruth wore Red Sox before he put on Yankee pinstripes. Kennedy family patriarch Joseph Kennedy moved to Bronxville, N.Y. from Brookline, Mass. His son Robert Kennedy was a senator from New York. Michael Bloomberg grew up in Massachusetts and became mayor of New York. William F. Weld was governor of Massachusetts, then ran for governor of New York. Supermodel Gisele Bundchen and her football player husband Tom Brady, who have a house in Chestnut Hill, Mass., are reportedly selling their Manhattan apartment.

If the flow of businesses and residents has tended in the direction of Massachusetts in recent years, it is the result of a policy experiment. Massachusetts has a flat state tax of 5.1% on all income, while New York has a graduated state income tax that tops out at 8.82%. Add in the 3.876% New York City income tax rate, and high-earning New York City residents pay an income tax rate more than double what Boston residents do.

Since Republican Governor George Pataki left office in 2006, New York has elected a series of Democratic governors who have done little to make the state more competitive. In Massachusetts, meanwhile, Republican Governor Charlie Baker, elected in 2014, has followed in the Weld-Romney-Pataki tradition, surviving in a liberal-tending state by blending fiscal conservatism with environmentalism, social liberalism, and winsome geniality.

What has transpired isn't exactly rocket science. Put a state with a top marginal tax rate of 5.1% right next door to a state with a top marginal tax rate more than double that, and people, and jobs, will flow to the state with the lower tax rate. It's like water flowing downhill.

Even the U-Haul website, a reliable barometer of moving demand and supply, tells the story — it's more expensive to rent a truck for a one-way move to Boston from New York than in reverse.

To be sure, there's a version of this story in which Massachusetts and New York, rather than studies in contrast, are slight variations on the same tale. They both have a single booming coastal metropolis — Boston and New York — along with rural areas and former factory cities struggling to reinvent themselves. They both lose retirees and young people to places such as Florida, Texas, Arizona, and Nevada, with warmer weather and lower taxes. They both have economies driven by education, health care, technology, and financial services. Their big cities both face challenges in housing affordability and in reliable public transportation.

By a wide variety of measures, though, Massachusetts is doing better than New York. Massachusetts public school students do better on standardized tests than do those in New York, though New York spends more money for each student. The Massachusetts population is growing faster than New York's is, according to the Census Bureau. Massachusetts residents have higher educational attainment and higher per capita income than New Yorkers do, and Massachusetts residents are less likely than New Yorkers to go without health insurance, the Census bureau says. Labor force participation rates are higher in Massachusetts, and the unemployment rate is lower in Massachusetts. Commutes in Massachusetts are slightly shorter. The poverty rate in Massachusetts is lower.

People who think of New York as New York City and its tall buildings may be surprised to learn that Massachusetts has twice the density of New York, as measured in population per square mile. As more and more New Yorkers move to Massachusetts, the Bay State may get even denser and the Empire State even emptier. What is true for countries is also true for states: a measure of success is when people are trying to get in rather than to get out.

Ira Stoll is editor of FutureOfCapitalism.com and author of JFK, Conservative.