Not to beat a dead horse, but the Governor of New York’s comments to Politico the other day are worth reviewing, if only for what they reveal about the mental state of certain political leaders. Viewing productive, successful businesses as “captives” to the tax code doesn’t strike us as the basis of a healthy relationship.
It’s also not the basis of a healthy economy. As evidenced by this nice map, New York is bleeding taxpayers and revenues and, judging from the Governor’s remarks, that’s not likely to change anytime soon.
So what did she say? Here are some highlights:
What I want to make sure we are smart about is having a system in place where it’s not just taxing for the sake of taxing.
Amen to that. The only problem is the state has not exactly been practicing what the governor is preaching here. Rather than the “smart” system described, New York is increasingly relying on a shrinking pool of high earners to fund an ever-expanding set of obligations.
And being conscious of the fact that I need people who are high-net-worth to support the generous social programs that we want to have in our state. Right?
Most states rely on their upper-income taxpayers for most of their revenue, so the financial challenge here isn’t unusual. What’s striking, however, is how one-sided her perspective is. “I need them” isn’t the same as “we need each other.” Exactly what is New York offering these taxpayers in return for all that revenue? This is also the opposite of what the Governor was saying just a few short years ago.
Now, there are some patriotic millionaires who stepped up. Okay, cut me the checks. If you want to be supportive, but maybe the first step should be to go down to Palm Beach and see who we can bring back home because our tax base has been eroded.
This paragraph has been misinterpreted. The Governor isn’t saying to be patriotic, you need to write her a check. There really is a group of trust fund babies self-labeled the Patriotic Millionaires whose whole schtick is they are willing to pay more, but only if everybody has to pay more. Rather, the Governor is making clear that this group’s vague promise of revenues that never materialize isn’t helpful – cut her a check now or convince all your transplanted friends in Palm Beach to return to New York. Don’t hold your breath for either outcome.
I have to look at the fact that we are in competition with other states who have less of a tax burden on their corporations and their individuals. And I would say remote work changed everything. There were people who could only work in an office in Manhattan or work in New York State and they were captives to our state. They were going to stay.
Back to the unhealthy relationship analogy, wouldn’t you want to make New York a place where successful taxpayers and businesses want to reside?
They’re not going there because they have a nicer governor, I know that for sure, but they’re going there because of the tax rate. We have to be smart about this. But we can fund what we want to fund with what we already are taking in.
How many times have we been assured that taxpayers don’t care about high rates and they won’t move their businesses and residences to avoid them? That is obviously not the case – we are seeing a mass migration play out in real time, and we have new economic work outlining why past research missed this narrative entirely.
So New York is at the center of the battle over public budgets and private wallets. It’s a battle that is headed to DC soon, regardless of who is in office. When it gets here, our public officials will have a choice – treat a productive segment of our economy as captives waiting to be fleeced or recognize that when it comes to sustainable tax policy, a broad base coupled with reasonable rates is the only option.