How (Not) to Make it in New York: Albany’s Record-Breaking Taxes and Spending
Growing up just outside of New York City on Long Island, I’ve been hearing Frank Sinatra’s “New York, New York” for as long as I can remember. Sinatra famously sings, “If I can make it there, I’ll make it anywhere.” Unfortunately, being able to “make it” anywhere in New York State is getting harder and harder to do every year.
As The Wall Street Journal Editorial Board noted, Albany is looking to pile on record tax increases despite receiving federal assistance from both the federal government in 2020 and 2021 and the Federal Reserve in 2020. Here are some of the proposals highlighted by the Wall Street Journal:
- Income taxes: Increase graduated rates on millionaires from 8.82% to 9.85% for joint filers earning $2.2 million, 10.85% for earnings above $5 million, and 11.85% (the new top marginal rate) for earnings above $25 million. New York City has its own income tax rate running to 3.88%, making the combined rate 15.73%.
- Capital-gains tax: A 1% surtax on investment gains by people earning $1 million a year. Capital gains are taxed as regular income in New York.
- Estate Tax: Increase estate tax rates from 16% to 20% for estates above $10.1 million. This is on top of the federal estate tax of 40%, making it a grand total of 60%.
- Pied-à-terre tax: A state levy on “high value” second homes in New York City.
In a letter to state leaders in Albany in late March, 250 of New York’s employers , spoke out against the tax and spending increases. They noted that these tax and spending increases are “both unnecessary and economically risky,” and “will jeopardize New York’s recovery from the economic crisis inflicted by COVID-19.”
While 2020 brought the subject of taxpayers leaving New York for lower tax states center stage, burdensome taxes and spending have put New York on the wrong side of the Laffer Curve for over a decade. Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index has found that New York has suffered from outmigration, losing over 1.3 million people on net since 2009.
Rich States, Poor States has also found that New York has the worst economic outlook ranking consistently since 2009. This is because New York has high tax burdens and other anti-growth policies such as high minimum wage costs and high workers compensation costs. Data from U-Haul shows New Yorkers are leaving for states with relatively lower tax burdens such as Florida, Texas, the Carolinas, Ohio and Indiana.
These tax burdens, anti-growth policies, as well as $277 billion in unfunded pension liabilities, $129 billion in unfunded OPEB liabilities and just under $75 billion in state bonded obligations make New York an expensive place to live and do business.
Rich States, Poor States is not the only index that found New York is in poor economic condition. The Federal Reserve Bank of Philadelphia State Coincident Indexes found that since 2009 New York has consistently fallen into the bottom half of state economic performance. New York landed into the bottom 10 states in 2012, ranked 40th, 2013, ranked 41st, and 2020, ranked 44th.
Economist Daniel J. Mitchell also noted that New York has ranked dead last in the Economic Freedom of North America, Freedom in the 50 States, and in the State Soft Tyranny Index. Mitchell also noted the Empire State ranked 48th in the State Business Tax Climate Index.
The latest round of recording breaking taxes and spending will only drive the cost of living up in New York and convince many additional New Yorkers to move out. If New York wants to attract and retain talented individuals and businesses, lawmakers in Albany can start by cutting taxes and spending.