New Yorkers of all political persuasions are starting to line up against New York City Mayor Bill DeBlasio’s income tax hike, which is looking more and more like a trainwreck. This week, both Democratic Governor Andrew Cuomo and former New York City Mayor David Dinkins denounced the plan.
More good news, according to a Wall Street Journal source, Governor Cuomo’s newly established tax relief commission is expected to hear recommendations from its co-chair, former Governor George Pataki, that could include a variety of tax cuts, from extending previously enacted middle-class tax breaks, to cutting property taxes, estate and business taxes.
Considering Cuomo’s commitment to cutting taxes this legislative session and Pataki’s pro-growth approach, DeBlasio’s tax hike plan could very likely go down in flames in the New York State legislature.
Cuomo’s decision to enlist Pataki in his effort to cut taxes was surprising, to say the least, and one would hope more than a mere political nod to the state’s fiscal conservatives and independents, in light of his 2014 run. Just yesterday, Cuomo announced that while his initial push would be lowering property taxes, he left the door for income tax reform open by adding that tax relief tied to income “makes sense”. To the New York Times, he voiced concern that “high taxes could drive people to move elsewhere."
There’s reason to worry. The State Comptroller reported in August that New York is lagging behind the national economy, with private sector employment growing nationwide by 2.1 percent in the year ending June 2013, but only by 1.5 percent in New York State. We “failed to match the national growth rate in major sectors including manufacturing, professional services, financial activities, and trade/transportation/utilities,” the report admitted. This trend may be getting worse: “New York’s rate of job gains slowed somewhat both compared with 2011 and relative to the nation. Meanwhile, the national rate of job creation continued to accelerate, and surpassed New York’s in 2012,” said the report.
If New York state leadership is serious about creating a pro-growth tax policy for the Empire State, it should carefully study The American Legislative Exchange Council’s (ALEC) recently released 2013 State Tax Cut Roundup. In it, ALEC provides seven Principles of Sound Tax Policy: simplicity, transparency, reliability, economic neutrality, equity and fairness, pro-growth, and complementarity to local tax decisions. These principles “provide guidance for a neutral and effective tax system; one that raises needed revenue for core functions of government, while minimizing the burden on citizens." Brilliant, right?
New York needs to watch its competitors. Each year ALEC uses information pulled from several non-partisan sources, including an annual state-by-state ranking of which states are more likely to fare better economically, based on legislative actions in 15 policy areas, including tax, labor and regulation.The report shows that more than one-third of states around the country have enacted growth friendly tax reforms—that’s eighteen enlightened state legislatures, which have enacted policies that will lead to job creation, provide for greater individual freedom, and encourage economic growth. Nearly 25 percent of state-based tax cuts in 2013 were tied to personal income, with another 28 percent of cuts benefitting business. Reductions in sales tax were the least attractive and were only enacted in 4 percent of the states.
New York State’s elected leaders have dozens of innovative tax policy templates to study if they are serious about securing their competitive advantage in the jobs war between the states. For the sake of the hardworking people of New York, let’s hope that the bipartisan, pro-growth initiatives of Cuomo and Pataki win out over de Blasio’s short-sighted revenue hunt.
