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CNN Gets New York’s Future Wrong

As a lifelong New Yorker and fan of Jerry Seinfeld, I really wanted to like CNN’s article,“Jerry Seinfeld is right about New York’s future.”  The more I read it however, the more delusional it became until it was outright laughable.  The author, Jeffery Sachs, attempts to explain why New York will not fail and he’s right that the city has had tough times before. He’s correct that there will be a day of reckoning. But he is utterly incorrect that this reckoning is “between the superrich and the rest.”

Sachs has decided to lay the blame of the current state of New York City on the feet of the highest income earners, outright suggesting that the rich have gotten richer on the backs of those experiencing financial desperation and hunger due to the pandemic. It’s not the elected officials. It’s not the rioters. It’s not the bungled COVID-19 responses. It’s the billionaires. You can’t make this up:

NYC has more billionaires than any other city in the world — 111 in 2019. They like NYC, like the rest of us. They depend on NYC for their vast fortunes. And many have enjoyed astounding windfalls of wealth this year as frontline workers around them have died or faced eviction. The true challenge for New York City is not technology or even the pandemic. It is basic decency. A city survives and thrives as a living breathing social organism, one that acts together for the common good. The billionaires must be the ones paying higher taxes to keep the City’s schools, hospitals, public transport and social services running as NYC picks itself up from the crisis.”

What Jeffery Sach either fails to realize or purposefully omits is that the billionaires are already paying far in excess of any rational share of taxes to keep the City’s schools, hospitals, public transport and social services running as NYC picks itself up from the crisis.  Highest income earners pay the top rates, including 8.82% in state income taxes along with an extra 3.876% in NYC income taxes. Add to that the 40.8% marginal federal income tax rate  — and billionaires pay an income tax rate of over 53%! That’s 119 people paying 53% of their taxes for $8.5 million people and justice warriors want them to pay more? It’s not like these billionaires are using more services.

What’s really going on is that Jeffery Sachs is helping to shape the narrative that billionaires need to pay (more of) their fair share. Is it any coincidence that a new “Make Billionaires Pay” campaign by progressive lawmakers and activists is being debated right now in New York as some sort of a budget justice initiative? They want to add a new form of capital gains tax on those exceeding $1 billion in assets. 

A fundamental principle of our American heritage and history says that you don’t take something from somebody just because they have it. That is the approach of a crook. When Willie Sutton was asked why he robbed banks, he famously replied, “because that’s where the money is.” Of course it’s a joke, but it seems like de Blasio didn’t get the joke. Crooks do that, not civil society. As Walter Williams said, “If one person has a right to something he did not earn, it means that another person does not have a right to something he did earn.” 

Rather than cutting spending and government services, these fiscally ignorant crusaders take the easy way out and blame the very people who provide the vast majority of the income NYC receives–and then subsequently squanders through bad policy and abysmal leadership. But they aren’t satisfied. They want more. And unlike Jerry Seinfeld, that’s just not funny.

Governor Cuomo: Clueless or Dangerous?

Governor Cuomo has come out blasting the new tax law, and in particular the substantial reduction in the deduction for State and Local Taxes (“SALT”), as unconstitutional and an “attack only on blue states.”

But everybody who has any knowledge of taxation and its constitutionality knows that Cuomo’s assertion is ludicrous. The SALT deduction – and ALL deductions – are at the complete discretion of Congress.  And as long as deductions apply under the same rules to every taxpayer no matter where situated, constitutionality can never be an issue  All the Governor’s raving does is show that he and his entire staff are either totally clueless,  or they know that their statements are total nonsense, but think so little of voters that they can be fired up with something that is utterly phony.

If Cuomo is concerned about what is devastating to New Yorkers, it is astounding that he is objecting to this law and yet he did not object to other tax issues in the past that clearly targeted his constituents. Despite acknowledging the very bad effects of high taxes on New Yorkers,  Where was Cuomo’s concern when:

1) the federal government (Obama) raised taxes on capital gains by almost 60%?
2) the federal government raised the regular rate by 25%?

Furthermore:

1) Cuomo reneged on his campaign promises and kept income tax rates on New York’s high income earners outrageously high,
2) he continues to hide from his constituents that his tax law already denies New Yorkers some or all of their deduction for SALT.
3) he continues to hide that NY tax law also denies middle and high income earners significant parts of the charitable deduction as well, buried so deep that most New Yorkers are not even aware they are being fleeced.
4) as a final point, a New Yorker who dies leaving $10 million to his heirs would now pay no federal estate tax – but he would owe $1.06 million to New York State.

But now Cuomo is bothered by the elimination of the SALT deduction in New York? He was AFFIRMATIVELY IN FAVOR of all of these past provisions,  which have been devastating to his constituents for some time.  Cuomo’s sudden compassion is complete hypocrisy.

Schumer’s Hypocrisy on State and Local Taxes

It is virtually impossible to defend the part of the Internal Revenue Code that provides for a deduction for individuals who pay State and Local income taxes (“SALT”). The deduction is simply a subsidy for those states who levy high income taxes on their constituents.  It actually incentivizes those states to levy high taxes, knowing that their constituents will have their federal taxes reduced as their state taxes go up. But this is patently unfair to constituents who live in low tax states, whose share of the federal tax burden therefore goes up.

Senator Chuck Schumer is leading the attack against proposed Tax Reform legislation that would eliminate the deduction for SALT. But since there is no rational argument to attack the proposal directly, he argues that the tax deduction is fair because NY (and other big blue states) send much more tax money to Washington than they get back.  

But this is hypocrisy of the highest order. It is Schumer’s own preferred legislation that causes this imbalance. He has successfully advocated for policies that greatly increase the size of the federal Government (sends money to DC), that increase the welfare state (benefits going disproportionately to the poorer parts of the country), and substantially raise the tax burden on the wealthy (many of whom live in NY). So he created the problem and is now asking to be bailed out?

As I have repeated many times before, If Kansas ever gouged its farmers, or Texas ever gouged its oilmen, like New York legislators (like Schumer) gouge their financial community, they would be run out of town!

 

New Yorkers Leaving In Droves

The New York Post had an article the other day regarding the continuous stream of New Yorkers leaving the state. An analysis found that “in 2014, 126,000 tax filers moved out of New York,” more than any other state in the nation. Also significantly, “The Empire State also lost the most “high earners,” who reported making more than $200,000 a year.”

This particular phenomenon has been going on for years, as I have written about in previous articles. But it seems like some people are groups want to downplay the exodus. The executive director of the Fiscal Policy Institute, Ron Deutsch, was sure to point out “that those who earn at least $1 million per year are more likely to stay put.”

It was a curious observation from the The Fiscal Policy Institute (FPI), which purports to be “an independent, nonpartisan, nonprofit research and education organization committed to improving public policies and private practices to better the economic and social conditions of all New Yorkers.”

Now, let’s stop for a minute. Of course those who earn more than one million a year would be more likely to stay put. They are the ones who can afford to be abused by the government and put up with it because they don’t want to give up their luxuries — the theater, the restaurants, all that New York has to offer. They can afford to stay. That $200,000 threshold? It’s really New York’s middle class, the backbone of the city. Because of the extremely high cost of living, they can’t afford to stay and put up with abuse.

If Texas ever did to their oilmen what New York does to its taxpayers, they’d be run out on a rail.

More Minimum Wage Hikes Mean Future Woes

On Wednesday, January 6, Mayor DeBlasio proclaimed a $15/hr minimum wage for the public workers in New York City. The cost for such a plan is expected to be more than $200 million over the next five years. Both De Blasio and Gov. Cuomo seem intent on playing the role of wage-crusader during their respective terms — but only for some New Yorkers.

Just like DeBlasio, Gov. Cuomo announced in early January that “he would provide a $15-an-hour minimum wage to some 28,000 state university workers.” And last November, “the governor made New York the first state to set a $15 minimum wage for public employees; he also took steps to secure $15 an hour for workers at fast-food chain restaurants.” DeBlasio, too, has sought other ways to provide more generous benefits. Late in December, he announced that NYC “would begin offering six weeks of paid parental leave to 20,000 city employees.”

The problem is that these minimum wage hikes not only add to the budget woes, it also creates inequalities between the public and private sector (except for fast-food workers). How is it good for New York that a McDonald’s open next door to a pizza shop with a $5 minimum wage difference? And how can Cuomo attract more businesses to New York state with costs that are already the highest in the entire country — when he is going to make them even higher?

Here in New York City, a minimum wage hike for public workers would mean that New York City will pay more for its labor than it currently has calculated to pay, in order to produce the exact same product or services. Looked at it another way, to then keep to the operating budget, NYC will get less goods and services for the taxes it receives. This would result in a bigger budget deficit — because of having to spend more overall to maintain the current goods and services.

Minimum wage hikes no one anyone except the pockets of the public sector workers, while pushing the budget on an even more unsustainable trajectory. The rest of the taxpayers will be expect to either 1) have yet another tax increase in the near future or 2) see diminished services. Neither of these scenarios benefits New Yorkers.