New York state’s 2021-22 budget negotiations took a bleak turn this week when both houses of the Legislature announced their plans for over $7 billion in tax increases and a 22.6% increase in spending. If enacted, New York will be the top-spending state in the country, with a budget rivaling California’s.
Residents of New York City, Westchester, Putnam, and Rockland counties already carry a disproportionate tax burden, accounting for 62% of all state personal income taxes. The suburban counties also have among the highest real estate taxes in the nation.
Throughout the pandemic, political pressure has been building on Albany legislators to “tax the rich” — ostensibly as retribution for how well the stock market and Wall Street performed in 2020. The truth is, the state does not need to raise taxes, thanks to the generous federal aid package engineered by President Joe Biden and Senate Majority Leader Charles Schumer. Politics, not economics, are driving this budget.
The Legislature’s tax package would impose the highest state tax rates in the country on New York residents: a top rate of 11.85% for personal income taxes, 20% for estate taxes, and a new 1% surcharge on capital gains. This comes on top of the extra taxes paid by high earners since 2018, when the deductibility of state and local taxes from federal personal income tax liability was capped at $10,000. Collectively, this change in the federal tax code is costing New York taxpayers $12 billion a year in additional taxes.
This week, the Biden administration let it be known that they intend to further increase personal and corporate tax rates to help pay for a national infrastructure bill. This means that residents of the city and suburbs may well be turning over more than 65% of their earnings to government and corporations may find that a New York location makes them uncompetitive with global rivals.
As one reviewer of the Legislature’s revenue proposals commented, “This must have been drafted by the governor of Florida.”
No one can lack sympathy for the losses that many New Yorkers have suffered because of COVID-19. The state is down more than one million jobs and thousands of small businesses have been forced to close. As the economy recovers, it may be necessary to find new revenues for education, health care, affordable housing and other priority needs. But while unemployment remains at 12% in the region, professionals are working from out-of-state locations, and businesses are deciding where they will permanently locate after the pandemic, this is the wrong time to increase taxes.
The downstate region, including Long Island, has been responsible for 94% of the state’s job growth over the past decade. COVID-19 has frozen that growth. State government should be focused on partnering with job creators, not creating incentives for permanent relocation to lower-cost, lower-taxed states.
Marsha Gordon is President and CEO of the Business Council of Westchester.
Kathryn Wylde is President and CEO of the Partnership for New York City.
The opinions expressed are those of the authors and do not necessarily represent those of Mid Hudson News.