Albany progressives are drooling at the chance to hike taxes as they hammer out a budget for the new fiscal year, which starts April 1. Yet their dreams threaten a nightmare for New York’s economy.
Gov. Andrew Cuomo’s plan would raise levies $2 billion, mostly via an income-tax surcharge on top earners and a delay in scheduled tax cuts for the middle class. And proposals in the Legislature (now packed with radical leftists) would go even further.
The income-tax hike alone would put New York’s top combined state and local tax rate at 14.7 percent, the nation’s highest. As the nonpartisan Citizens Budget Commission notes, that “heightens the risk that these residents will leave the state, taking their tax payments and possibly business interests with them.”
Empire Center fiscal expert E.J. McMahon has echoed that fear, noting that “the highest 1 percent of taxpayers” already account for 40 percent of the state’s personal-income tax. If efforts to bleed them for more drive them away, the state could see a net loss on its tax hikes.
Cash-flight risks are higher now, the CBC points out: “The past 11 months of telecommuting and remote business administration” have proven “the viability of being outside of New York.”
Meanwhile, leaders in the securities industry, which accounts for 18 percent of state tax collections, are sounding alarms about similar “consequences” of reinstating a stock-transfer tax: “If Albany lawmakers get their way,” New York Stock Exchange President Stacey Cunningham warns, “the center of the global financial industry may need to find a new home.” Already, she notes, many Wall Street employees are migrating to states with more hospitable tax policies.
So New York stands to lose not just taxpayers who contribute the most to the budget but also a major industry. The state would never look the same.
Stock-transfer taxes, by the way, often fail to bring in the expected revenue, since firms simply move to avoid them, adds Cunningham. Regular folks would pay, too, as the cost gets passed along: Vanguard estimates a tax of just 0.1 percent would force retirement-account investors to work 2 ½ years longer to rack up the same savings.
There are better budget-balancing steps, like trimming Albany’s “economic-development” slush fund, which hands out nearly half a billion dollars a year to the film and TV industry alone. Or reining in school spending, which is far higher here per student than in any other state.
But raising taxes should be off the table. If New York is to survive, fiscally and economically, it needs to prop up its economy and hang on to its tax base — not decimate them both.