Taxing the Rich Busts New York's Budget

According to the Wall Street Journal, New York Governor Andrew Cuomo has had a tax epiphany. He has discovered that when you raise taxes for New Yorkers they tend to flee the state… for warmer low tax states like Florida.

In his words:

Tax the rich, tax the rich, tax the rich. We did that. God forbid the rich leave.

As it happens the rich are abandoning New York State… at least for six months and a day… the amount of time required to longer be a state resident. What happens then is simple:  you see reduced revenues entering the state’s fiscal coffers and you blow a massive hole in the state budget.

Mr. Cuomo delivered this testimony from the Book of Tax Revelation while announcing Monday that New York state’s income tax revenue over the last two months was $2.3 billion below projections. “That’s as serious as a heart attack,” he said.

Of course, one reason why this is happening is: tax reform. When Congress passed a tax reform bill, it reduced the deductibility of state and local taxes. It also reduced the deductibility of mortgage interest. Savvy New Yorkers saw the writing on the wall and bought real estate in Miami.

Mr. Cuomo blamed in particular the 2017 federal tax reform, which limited the deductibility of state and local taxes to $10,000. “It literally restructured the economy to help red states at the cost of blue states,” he groused. “It was a diabolical, political maneuver.”

He would know about tax sadism. New York City’s combined state and local top rate of 12.7% hits taxpayers earning more than $1 million and is the second highest in the country after California. The deduction limit raised New York’s top rate by an effective 5%, though this was partially offset by the tax reform’s 2.6 percentage-point reduction in the federal top rate.

But, the Journal continues, taxes on wealthy New Yorkers also rose during the Obama years:

The reality is that rates on wealthy New Yorkers rose more during the Obama years due to the 0.9% Medicare surcharge on investment income and expiration of the Bush tax cuts for high earners. But Mr. Cuomo is right that tax reform has made New York less economically competitive by fully exposing high earners to its progressive taxes.

Cuomo has noted that it’s not just rich New Yorkers. Financial service firms are also considering a move away from the Big Apple… because it has become too damned expensive. Aside from the tax issue, the cost of living in New York easily outpaces that of all other locales. And, for the city and state taxes people pay the public transportation system, especially the subway, is a nightmare.

Of course, Cuomo also landed the Amazon account... so to speak. He persuaded Amazon to open a headquarters in Long Island City. Given that New York's politicians are imbeciles, a group of them have gotten together to try to block the Amazon deal. Somehow they believe that their neo-socialism will make New York more attractive for business. Keep in mind these are the politicians who are cheering their imbecile-in-chief, Alexandria Ocasio-Cortez.

Anyway, now that the state is receiving less tax revenue, it will be cutting public services even more. Less money for public transportation. Less money for education. High taxes, soaking the rich, seems not to be very good policy.