Following in the footsteps of Tom Golisano, the owners of a small Buffalo area company have announced that New York State’s income tax hike is prompting them to move to Florida — except, unlike Golisano, they are also taking their entire company with them.

The story of the Bell family and their North Buffalo firm, Science First, underscores the impact of higher income taxes on the entrepreneurial sector.  Three-quarters of businesses–like Science First–are organized as either sole proprietorships, Subchapter S companies or limited partnerships, whose net income is reported on the owners’ personal income tax returns.

High-income taxpayers are two-and-a-half time more likely than the average taxpayer to have small business income.  In fact, based on the most conservative estimate of tax hike impacts at the federal level, at least 45 percent of New York’s newly enacted income tax increase on “the wealthy” will fall on small business income.  For these filers, after-tax income is a crucial source of working capital, as explained in the Buffalo News article on the Bell’s move.

So of the five [Bell] family members involved in [Science First], the state tax rate for two will rise to 8.97 percent from 6.85 percent because their S-corporation filing lists their incomes at more than $500,000, and three others will pay more because their incomes exceed $200,000.

“So there will be less to invest in the business,” Aaron Bell said.

Florida has no personal income tax and does not impose corporate tax on Subchapter S income.   This reportedly will save the Bells $100,000 a year.

The article recounts the Bells’ complaints about what they considered an unhelpful attitude on the part of the Erie County economic development officials, as contrasted with the warmer reception they received in in Nassau County, Florida, where Science First will be relocating.   The phasing out of New York’s Empire Zone incentive program was cited as a factor in the family’s decision.  But the article also indicates that the state income tax increase was the clincher.

Then again, perhaps the Bells don’t realize that by relocating from upstate New York to Florida, they are “moving to a space where there’s a little bit less civilization.” Aaron Bell had better be prepared to hear the accusation that he’s just another rich guy who “would just prefer that the rest of us row while he catches some rays.”

Unfortunately, it’s far more likely the Bells are the wave of the future.