In November 2020, American Pigeon reported on the 70% of residents leaving the city, only to be replaced by a 30% intake. The city was officially ejecting more people than it was taking in. That amounted to an estimated 277 people moving from the city daily. Over one-third of small businesses closed, and a total of 646,000 jobs across all private sectors were lost during that time. New York State is now proposing more than disastrous lockdowns.
According to the U.S. Census data, New York is the leading state with the highest income inequality. This inequality, exacerbated by the pandemic and the state’s prolonged lockdowns, reflects the state’s slow economic recovery since the pandemic began.
On Tuesday, state lawmakers and Cuomo have reached an agreement to raise taxes as part of a $212 billion budget deal. The top tax rate would increase from 8.82% to 9.65% for single filers earning more than $1.1 million. For income earners between $5 and $25 million, the rate increased to 10.3%; for more than $25 million, 10.9%.
As Bloomberg reported, “Americans earning more than $400,000 a year are already bracing for higher federal taxes from the Biden administration, which has also proposed raising the corporate levy to 28% from 21%.” The top 1% of New Yorkers reported a combined $133.3 billion in income and paid $4.9 billion in local income taxes in 2018, accounting for 42.5% of the city’s income tax.
These rates expire in 2027. With city taxes, the combined top rates would lay between 13.5% and 14.8%. However, experts say that with federal levies, the tax rate would more likely be 51.8%, higher than rates in some European countries.
Critics of the tax hike include Democratic mayoral candidates Andrew Yang and Ray McGuire. They argue that these rates will prompt higher-income families to move out of the City, thereby hurting tax revenue and jobs.
Other critics include 250 business executives. In a letter delivered to Cuomo and the State Legislature, they said the tax hike would “jeopardize New York’s recovery from the economic crisis inflicted by Covid-19” and that the $1.9 trillion federal relief bill passed earlier this month, renders the taxes unnecessary. The federal relief bill, signed into law on March 11th, granted New York State $12.7 billion, the City $6.1 billion, the state’s counties $3.9 billion, and $875 million to small cities, towns, and villages.
The letter signed by business executive states: “Once we are on a path toward restoring more than one million jobs and thousands of small businesses that New York has lost in the past twelve months, there may well be need to raise new revenues to fill the gaps in our education, health and social welfare systems… This is not about companies threatening to leave the state; this is simply about our people voting with their feet. Ultimately, these new taxes may trigger a major loss of economic activity and revenues as companies are pressured to relocate operations to where the talent wants to live and work. This is what happened to New York during the 1970s, when we lost half our Fortune 500 companies, and it took thirty years to recover.”
The letter was signed by JPMorgan Chase CEO Jamie Dimon, BlackRock CEO Larry Fink, Citi CEO Jane Fraser, BNY Mellon CEO Thomas Gibbons and Goldman Sachs CEO David Solomon, and other executives at major law firms and real-estate companies, as well as chambers of commerce around the state. Robert Thomson, the CEO of News Corp , also signed the letter. News Corp is the parent company of The Wall Street Journal publisher Dow Jones & Co.
A breakdown of the proposal includes:
- Raise the tax rate paid by individuals earning more than $1 million (and couples earning more than $2 million) to 11.85% from the current rate of 8.82%
- Establish a new tax bracket for residents who are earning between $5 million and $25 million (the tax rate would be 10.85%), and a separate one for anyone earning more than $25 million (the tax rate would be 11.85%)
- Make a new capital gains tax worth 1% on individuals earning more than $1 million a year
- Impose a progressive state tax on individuals with a second home in New York City — commonly referred to as a pied-à-terre tax
- Raise the estate tax from 16% to 20%
- Create an 18% “surcharge” on corporate franchises, utilities and insurance companies
- Reinstate a minimum business tax on corporate capital
Gov. Cuomo, whose sexual assault and nursing home investigations fell silent, has denied that taxes are increasing. Instead, he argues that after the repeal of SALT, taxes will actually be lower.
SALT was a Trump-era policy that “permits taxpayers who itemize when filing federal taxes to deduct certain taxes paid to state and local governments. The Tax Cuts and Jobs Act capped it at $10,000 per year, consisting of property taxes plus state income or sales taxes, but not both.”
If New York’s wealthiest are “voting with their feet”, then where would their feet lead them?
Francis Suarez, the mayor of Miami, told CNBC that he’s spoken to some of New York’s biggest firms on moving. “I can’t give names but if you’re looking to know if we’re talking to the biggest firms in New York, we are. Clearly, the toxic climate in New York has led businesses to look to Miami as an attractive place for long-term expansion and relocation,” Suarez added.
Florida currently enjoy a zero percent tax on personal income, making the state friendlier to business prospects.
For a state that has been devastated by increased lockdowns, forced closure of small businesses, already some of the highest taxes in the country, coupled with generous state and local grants totaling about $23 billion, this new step taken by the state government begs the question: what exactly is New York thinking?