Dems Want To Increase New York's Already Heavy Tax Burden
New York City is booming. So why do the liberal candidates for mayor want to tax us back to the bad old days?
New York imposes the nation’s heaviest big-city tax burden — which, in turn, is a major component of the Big Apple’s notoriously high cost of living.
But you wouldn’t know it from listening to most of the leading mayoral candidates, including all of the Democrats, who seem to assume that New York can keep taxing with impunity.
Politicians can downplay or ignore the issue because the city’s tax structure shifts a large share of the burden away from the vast majority of the voters.
For example, New York’s complex and inequitable property tax falls most heavily on commercial property and landlords while giving a huge break to owner-occupied one-, two- and three-family homes. While apartment dwellers tend to blame greedy landlords for high rents, City Hall itself is a bigger culprit. According to a nationwide survey published by the Lincoln Land Institute, New York taxes apartment buildings at more than twice the average effective rate for other big cities — a cost inevitably passed along to tenants.
Commercial property owners are also gouged: Their tax rate as a percentage of market value is 76% above the big-city norm, the Lincoln Land Institute study found. And the burden on prime office space is even heavier. As of 2011, Midtown office buildings were taxed at triple the square-foot rate for similar space in other major cities, according to the Studley Effective Rent Index.
Big businesses occupying those offices are subject to a combined city and state corporate net income tax of up to 17.5%, easily the highest in the country. Unincorporated firms — including many of the city’s most successful professional and investment firms — pay a unique separate tax on their profits.
New York homeowners, renters and business owners alike get to pay an added tax premium: the city resident income tax, which now tops out at 3.9%. Including a supposedly temporary state “millionaires tax” that Gov. Cuomo has now extended twice, the highest rate on city residents’ personal incomes is 12.7%, second in the nation only to California.
Bill de Blasio, now leading the Democratic mayoral field, is campaigning on a promise to squeeze the top income brackets even harder. He says he’ll push Albany and the City Council to approve a tax increase on New Yorkers earning more than $500,000 in order to fund an expansion of pre-school public education. This would raise the rate in the highest combined state and city tax bracket to 13.2%, just a hair below California’s 13.3%.
Comptroller John Liu has proposed a similar tax increase, which he’d combined with some small middle-class tax cuts. Chris Quinn and Bill Thompson say they don’t favor an increase for now, at least, but both embraced income tax hikes to close city budget gaps as recently as a few years ago. Anthony Weiner also has called for a middle-class tax cut to be financed by what he calls “a reasonable new tax rate for the wealthiest 1% of New Yorkers.”
But a soak-the-rich tax hike would hardly be “reasonable.” More like foolhardy. The highest-earning 1% of city residents already generate over 40% of the city’s income-tax receipts. New York’s dependence on the taxes paid by high rollers has made the budget more vulnerable to cyclical economic swings. Between fiscal years 2003 and 2008, the city’s personal and business income taxes skyrocketed by $7.3 billion. But in the wake of the financial crisis and recession, revenues from those taxes dropped by $2.4 billion in 2009 alone and have yet to recover to pre-recession levels.
Including federal taxes, the combined federal-state-local tax rate on personal income in New York City is now 52%, the highest it’s been in nearly two decades. And further federal tax changes could sharply reduce or even eliminate the federal deduction for state and local taxes, which would hammer the city’s competitiveness.
By helping to drive the cost of doing business into the stratosphere, high taxes discourage job creation. This is a major contributor to the long-term hollowing out of the city’s middle class: While the superstars of business, entertainment and other fields can earn enough here to justify a New York presence, back-office and middle management jobs migrate to less-expensive locations.
While Republican John Catsimatidis and some of the Democratic candidates have proposed more targeted tax breaks for small business, the lone 2013 mayoral candidate to talk about broader business tax relief has been Republican hopeful Joe Lhota. No surprise there: Lhota was a top aide to former Mayor Rudy Giuliani, who made lowering taxes an annual budgetary priority.
Giuliani’s tax cuts — coinciding with big cuts in state taxes — played an important role in the city’s economic resurgence during the 1990s. In the last 12 years, however, the city tax burden as a share of economic output has climbed back to levels last seen two decades ago, under former Mayor David Dinkins.
Even if the next mayor avoids tax increases and merely holds the line on city taxes, the result will be a real erosion of the local revenue base. To compete effectively for the jobs and investments of the future, the city needs to reduce taxes — even those unseen by most New Yorkers.
This piece originally appeared in New York Post
This piece originally appeared in New York Post