This is estate tax week, with the Senate getting set to grapple with the issue, and all of a sudden the Democratic front-runner for governor is worried about population decline in New York. “We know we’ve lost population and jobs, we’re seeing our cities disappear,” Eliot Spitzer told an audience in Newburgh. “These are consequences of failed leadership.” Not even John Faso would gainsay that point. New York’s population is buoyed mainly by a steady influx of foreign migrants, but all too many people opt not to stay here for long or, even if they’ve been here a while, to leave. But the failure of leadership here is not of a kind one normally looks to a Democrat to correct, for it involves largely a failure on taxes, including, as it happens here, the state’s estate tax.

Consider that while New York’s overall rate of population growth is anemic at best, the state is hemorrhaging senior citizens. When Census Bureau researchers crunched the numbers in the early part of this decade, they discovered that 35,491 people over the age of 65 moved in to New York between 1995 and 2000, but 149,662 moved out. The quest for a warmer climate undoubtedly played a role in their decisions, but that can be only part of it. New Hampshire, not exactly known for tropical weather, enjoyed noticeable inflows during the same period, albeit flows on a scale more in keeping with a smaller state.

New York’s estate tax is one of the culprits. That tax, after all, affects wealthy and entrepreneurial decedents, of which New York would have quite a few if so many weren’t leaving. Those are also the seniors who, almost by definition, have the resources to move somewhere else. And thanks to the estate tax, they have every incentive to leave. The Empire State, after all, takes roughly 16% of their estates. Unlike many other states, where estate taxes are linked to the federal tax and thus have been declining as the federal tax has been phasing out under President Bush’s 2001 tax cut, the total top effective rate on New York’s dead has been increasing thanks to a technical quirk in the law.

Remarkably, this results from efforts to reduce the tax. When Albany cut the tax rate to an effective 16% from 21% in 1997, lawmakers made the state rate equal to the credit offered by the federal government. But the law was written so that it would not keep pace with changes in the federal law. The federal tax cut of 2001 included a reduction in the federal credit, but the state tax has stayed the same, creating an effective increase in the state tax rate. That is, estates are charged more out-of-pocket than before because the federal credit no longer covers the state bill. This has left New Yorkers paying up to 16 percentage points more in estate taxes than residents of states like Florida that have stayed in line with the federal changes.

Thus, paradoxically, if the solons in Washington permanently eliminate the federal estate tax – and they’re four votes away from a filibuster-proof majority to do just that in the Senate – New Yorkers will end up paying higher taxes relative to other states. Leave it to Albany to add up two tax cuts and get a tax increase. The senators in Washington are catching on to the fact that estate taxes are unfair since the assets in estates have already been taxed once. Until lawmakers in Albany reach the same conclusion, New Yorkers will only be able to sit and wave goodbye to our departing seniors as they head down Interstate 95. As this debate gets going, New Yorkers will see who offers more confidence on the tax front, Mr. Spitzer or the Republican front-runner, John Faso.