Recent weeks have seen both Governor Cuomo and the State Senate express interest in reducing New York’s staggering tax burden. That’s encouraging and long overdue. When you consider the facts, tax reform should have been a priority in Albany long before now.
In 2010, New York’s tax burden ranked the highest in the nation and well above the national average. On average, New Yorkers pay $6,375 per capita in total state and local taxes. Unsurprisingly, New York has the highest cost of doing business and ranks among the nation’s leaders in population loss.
In fact, data from the US Census show a pronounced migration over the last decade away from high-tax states like New York to low-tax states such as Florida and Texas. Defenders of high taxes often cite the weather as the main attraction in those states. But that argument is undercut by data showing people moving within their own region from high-tax states to lower-tax states.
The fact is that tax policy is inextricably related to numerous fiscal and economic and problems currently facing New York. Many of those problems can be solved or reduced if the talk in Albany is sincere.
It is a matter of economics and common sense that when you tax more of something, you get less of it. New York’s high income tax, for example, punishes work. It punishes people more who work more. It punishes savings and investment. According to the nonpartisan Tax Foundation, which analyzes data from the IRS, the Census and elsewhere, New York suffered a net loss of more than 1 million income tax payers between 1993 and 2010, the last year for which available information. Those taxpayers took with them almost $80 billion in adjusted gross income. That’s $80 billion now circulating in the economies of other states.
Unsurprisingly, Florida is the big winner. With no income tax, the Sunshine State gained a net 300,000 income taxpayers from New York. Sure the weather is great. But New York has a net loss of taxpayers to Massachusetts, Maine, New Hampshire, New Jersey, even Alaska. Clearly, there’s more to it.
Leaders in New York have known for many years that our high taxes are self-defeating. Some, like Governor Cuomo, have tried to patch the holes by creating narrow programs aimed at rewarding certain businesses or favored industries. The “Start-Up New York” is perfect example. If offers some relief to some businesses as long as they invest in only some places. It may be good for a handful of investors but doesn’t improve the business climate.
The truth is that Albany is addicted to taxes. And its addiction is killing New York. If the Governor and lawmakers are serious about kicking the habit, they should start with a 10-step program recommended by the National Federation of Independent Business (NFIB) recently.
Our plan starts with reducing the personal income tax. Many people don’t realize that most small businesses pay taxes as individual filers. So New York’s sky-high income tax is aimed straight at small businesses. The NFIB proposal would provide relief to small businesses that earn less than $500,000 so they have a chance to grow, invest and create more jobs. It would also reduce the corporate tax for small businesses.
We recommend reforming the MTA payroll tax, a killer for businesses down state, and lowering the agriculture assessment on family farms. Manufacturers, agri-business and Main Street would all pay less to Albany and invest their money back into the state’s economy.
The NFIB plan also advances two necessary legislative reforms. Since most bills passed by the Legislature have an economic impact, our plan requires that all legislation be accompanied by a economic impact statement. Lawmakers in Albany should know, and the general public deserves to know, how legislation will affect small business and the economy before it’s passed into law.
The second reform would require a “super-majority” in the Legislature to increase taxes. Sixteen states currently have such a standard. It would impose discipline on the big spenders in Albany and require a much broader consensus to raise taxes.
In the past couple of years New York has spent millions on slick commercials telling the world that we’re open for business. They may win awards, but they won’t change the state’s image as a good place to leave unless Governor Cuomo and the Legislature finally stop tinkering with a tax system that needs major repairs.