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The Urban Conservative
August 5, 2014
New York is one of the few cities in the U.S. with an income tax.
Progressive mayor Bill de Blasio is accused of pressing to “tax for the sake of taxing.”
Imagine No City Income Tax
by Herbert W. Stupp
fitzgerald griffin foundation
NEW YORK, NY — With Mayor Bill de Blasio’s first budget just kicking in this month, New Yorkers should be grateful that Albany managed to block the Mayor’s proposed increase in city income taxes. But we ought not relax just yet, if ever. In his budget presentation, the Mayor announced his intention to again lobby for income tax hikes before long, and his allies in the Working Families Party have promised to keep working for higher taxes.
As more states move toward abolition of income taxes, a locality like a city — our city — that imposes such taxes stands out like a sore thumb, especially when coupled with high New York state taxes.
With big spending, high taxing “progressives” occupying all citywide offices, those who favor more frugal government might wonder if tax relief is even remotely possible.
History proves that sweeping changes often begin with an unknown or unpopular idea being championed by seemingly quixotic advocates. Socialists Eugene Debs and then Norman Thomas ran hopeless campaigns for president a century ago, but planted the intellectual seeds that culminated in the creation of the Social Security system years later, encouraged by President Franklin Roosevelt. In 1964, conservative Republican Senator Barry Goldwater was clobbered in his challenge to President Johnson. Goldwater carried only five states, but he inspired a generation of young activists who assisted Ronald Reagan in capturing the Presidency and implementing many of Barry’s conservative ideas only 16 years later.
So with the Mayor and other powerful voices calling for tax increases on high earners, it is worth asking a cosmic question: Why does New York City even have an income tax? As more states move toward abolition of income taxes, a locality like a city — our city — that imposes such taxes stands out like a sore thumb, especially when coupled with high New York state taxes. North Carolina has created a lower, flatter tax as an interim step towards abolishing their income tax. Progress was recently made in Louisiana and Nebraska toward ending their income taxation. Seven states already refuse to levy income taxes, and fully ten governors proposed income tax cuts last year.
New York City is among just a handful of cities and localities that taxes its citizens’ income, all of which was implemented by “progressives.” Overwhelmingly, Americans do not live in cities or towns that impose income taxes. Only Philadelphia, D.C. and Scranton approach NYC’s top marginal rates of over 3.9% of income, over and above our high state income taxes. Of the 18 million Americans who live under regimes that demand city income taxes, nearly half (8.4 million of us) live in New York City. Governor Andrew Cuomo, prior to Mayor DeBlasio’s election, was forthright: “New York has no future as the highest taxed state in the country.”
It’s not as though city income taxes came in with the cotton gin or even the Statue of Liberty. At least two million New Yorkers can recall that friendlier time when the city did not tax incomes. The income tax was signed into law by then-Mayor John Lindsay (another “progressive” icon) in 1966, a year after The Beatles’ first Shea Stadium concert. Overwhelmingly, Americans do not live in cities or towns that impose income taxes. Only Philadelphia, D.C. and Scranton approach NYC’s top marginal rates of over 3.9% of income, over and above our high state income taxes.
With our new Mayor having pressed to “tax for the sake of taxing,” as Governor Cuomo’s top aide, Larry Schwartz, phrased it, what would it take to bring us back to those glorious days of 1965, when New York City was not taxing incomes? New York City’s planned expenditures for fiscal year 2015 are $75 billion, though the Independent Budget Office expects some initiatives will cost more than planned. City income taxes to be collected will account for $9.5 billion of that, or 12.7% of the total budget.
No doubt, income taxes can’t be wished away, and $10 billion is a lot of money to most everyone outside of Washington. But if our city fathers and mothers could save a mere 1% from each year’s budget — about $750 million — we could eliminate the city income tax in the range of twelve-to-fourteen years.
The $9.5 billion we will collect in NYC income taxes is not too much more than the increase in city pension expenses during the Bloomberg years. If the city could gain control over exploding pension costs, that alone would bring us much closer to abolishing the local income tax. Sadly, the City Council added $1.3 billion to the Mayor’s budget, delaying efforts to abolish the income tax.
Some of my liberal pro-tax friends simply do not appreciate how mobile the wealthy can be. Even Mayor Koch, in a rare departure from common sense, wondered: “Where are they going to go?” in response to a past income tax hike.
But hundreds of thousands of the wealthy and even moderately successfully have been voting with their feet for decades, since the imposition of the Lindsay income tax 48 years ago. The local political adversaries of Rush Limbaugh and Ann Coulter cheered when they shifted their official residences to Florida. “Good riddance,” said then-Governor Paterson to Limbaugh’s departure, without telling us how many millions of income tax dollars Rush was taking with him. Clearly, income tax hikes are not victimless economic decisions.
New York has no future as the highest taxed state in the country.”
— New York Governor Andrew CuomoI welcome a growing number of wealthy people settling in New York City, whether I agree with their views or not.
A classic example of mobility is the case of Tom Golisano, the billionaire founder of Paychex, Inc. in Rochester, NY. Golisano ran as the Independence Party candidate for Governor thrice, but warned that increased taxation would lead him to move his residence from New York state. In 2009, Golisano did just that, taking about 90 minutes to complete various forms of required paperwork to become a Florida resident. Mr. Golisano needed to spend only some more time each year in his second home to make Florida his new official home for tax purposes.
New York’s liberal leaders should have realized how counterproductive tax increases can be. Hoping to raise more revenue by taxing someone like Tom Golisano, the actual results are this: New York state loses $13,800 a day in the taxes thanks just on this one man’s move! That’s nearly $5 million in taxes lost each year just by chasing one successful individual out of our state. Who’s making up these losses?
Larry Mone of the Manhattan Institute points out that the average increase in taxes on upper brackets under Mayor DiBlasio’s now-stalled plan would have been about $183,000 a year. Facing that sort of new tax increase, how many more wealthy New Yorkers would depart, opting to pay much lower taxes elsewhere? And who would make up those losses to the city treasury?
Of course, there is always that idealistic, quixotic suggestion, that by trimming our bloated city budget just 1% each year, we can abolish our city income tax in the foreseeable decade of the 2020s. Imagine Mr. Golisano and others moving to New York City — the tax haven of the future!The Urban Conservative archives
The Urban Conservative is copyright © 2014 by Herbert W. Stupp. All rights reserved.
Herbert W. Stupp was Commissioner at the NYC Department for the Aging in the Giuliani administration. He also served in the Reagan and Bush 41 administrations.
A version of this article appeared in AM New York (a publication of Long Island Newsday) on July 25, 2014.
See a complete biographical sketch.
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