All Things Political: Albany’s proposed tax hikes myopic

Adam Haber

Since the beginning of the Trump presidency, the federal government entered a new reality where budget deficits don’t matter. Ironic, since Republicans claim to be the party of smaller government spending. Then, with the pandemic bearing down, newly elected President Joe Biden injected the economy with an additional $1.9 trillion COVID-19 stimulus package.

We ought to give thanks to Senate Majority Leader Chuck Schumer, who has exceeded expectations and showered New York with more than $100 billion of it. And this doesn’t include what New York will receive from Biden’s proposed $2.3 trillion infrastructure bill. Yet in spite of this incredible largess, the New York State Legislature believes it’s prudent to dramatically raise taxes and make the ultra-wealthy pay their “fair share.”

The problem with raising state tax rates is that many of New York’s ultra-wealthy no longer want to live in the highest taxed state in the nation and are moving out. According to a Dec. 23 USA Today article, from 2019 to 2020 New York lost 126,355 residents while Florida gained 241,246. It’s no secret that it’s cheaper to live in Florida, and that’s why ultra-wealthy New Yorkers are moving there. Former New York residents get to keep about one-eighth more of their income in Florida.

New York State Legislators, under the formerly strong arm of Gov. Cuomo, used to have their budget submitted by the annual April 1 deadline. Now that Cuomo is fighting for his political life under a slew of sexual harassment allegations, the Legislature intends to push the currently late budget far to the left with unprecedented tax hikes.

Some of the proposals to raise taxes include: a top tax bracket jumping from 8.82 percent to 11.85 percent (which will be the highest of any state except California); a new capital gains tax of 1 percent on incomes above $1 million; a second-home tax on mansions and pied-a-terres; an estate tax boost from 16 percent to 20 percent (tying New York for highest in the nation); and a slew of other taxes projected to raise an additional $7 billion.

The gap between the rich and the poor is obscene and getting worse, but it’s the federal government which should be closing the wealth gap, not the states. When states like New York attempt to foster income equity with higher taxes, rich residents just leave.

In my opinion, the easiest way to look at how bad the additional proposed NYS taxes are is to compare them to Amazon’s business model. Every New Yorker claims they want to shop local and support small businesses, but the truth is most residents will search to find the lowest possible price, even if it means supporting an out-of-state business vs. one just down the street. The rich are doing the same with taxes by shopping cheaper costs of living and tax rates and moving to places that have them. Any NYS Legislator who doesn’t get this is myopic and the capital drain from New York will only accelerate with higher state tax proposals.

Raising taxes while governments don’t run efficiently is akin to adding more water to a leaky bucket. Yes, in the short term there will be more water, but over time it will leak out the bottom. Instead, I’d like to see elected officials do the hard work of creating a government that runs efficiently. I’ve spent over a decade working and volunteering in several different capacities for local municipalities. As a former insider, I can assure you government can do much better.

For example, there are still a plethora of NYS municipalities who haven’t refinanced their debt (just as you would your mortgage). The Wall Street Journal reported last month that New York City spends $447,377 to incarcerate one person for a year, and it’s projected the federal government will lose $7.5 trillion to tax cheats over the next decade. And Blue Cross Blue Shield estimates that health care fraud, which includes Medicaid and Medicare, costs about $230 billion a year.

Every business owner knows this simple truth: if you can’t raise prices, the best way to raise profits is to run more efficiently. The same should hold true for government. If the NYS Legislature doesn’t heed this guiding principle, tax hikes will push wealthy New Yorkers to leave and cause the rest of us to pay more to keep the wheels of government turning.

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