Opinion

If tax hikes are inevitable, ensure they are prudent

Increases in taxes on the rich should be temporary and paired with spending cuts.

New York has to adapt to changing circumstances in order to avoid becoming a "ghost town."

New York has to adapt to changing circumstances in order to avoid becoming a "ghost town." Shaun Jeffers/Shutterstock

By the end of this month, the state Legislature will likely increase taxes on wealthy residents of New York, notwithstanding that some have already fled for warmer and tax-friendlier climates such as Palm Beach.

Even with President Joe Biden’s COVID-19-relief bill pumping $12 billion in desperately needed funding into New York’s red-stained state coffers (and$5.6 billion into New York City), these tax hikes will be justified as an antidote to what is likely still to be a gap of at least $3 billion in the state budget thanks to the pandemic. Steeper progressive taxation will also be justified by the growing belief among many in Albany that too much capital has accumulated in too few hands and that, accordingly, even putting fiscal necessity aside, the state should tap that accumulated capital to address its many long-standing social needs.

Given the foregoing, those who are concerned about the impact that rising taxes could have on New York’s long-term economic competitiveness face a stark choice. Either they can continue to try to stop these increases altogether and likely fail, or they can earn a “seat at the table” by bowing to the political reality and focusing on ensuring that any tax hikes be done in a manner that is prudent and responsible. Now is the time to accept reality and focus on the latter strategy. 

So, what might a prudent and rational tax increase look like? The key is pairing it with the following conditions: 

* For every extra dollar in taxes raised to close the budget gap, governments should be required to prune the same amount on the expense side, either by eliminating ineffective programming or instituting real efficiency gains.

* Because any tax increases are likely to make New York among the very highest-taxed jurisdictions in the United States (especially in the city, thanks to its personal income tax), they should be temporary emergency measures aimed at lifting the city and state out of their twin health and economic crises, meaning that they must truly sunset after a brief period, such as three years.

* All the money raised through the tax increases should be earmarked for specific purposes, such as supporting critical basic services, creating a relief fund for local small businesses, combatting homelessness or fixing our public transit, with this money placed in a “lock box” that can only be accessed once a neutral third party — such as the New York State Financial Control Board or the state and city comptrollers — have certified that the state and city are allocating this money properly and otherwise have complied with the conditions attached to the tax hikes.

Why, in an environment in which so many on the upper end of the wealth spectrum in New York have done so well should we even consider such conditions? The answer is simple: The business community and the wealthy are vital to New York’s long-term financial health. They pay a large share of taxes. Their spending supports many local businesses. Their philanthropic dollars underpin the robust non-profit sector. If rich people decide to move, or if high-paying firms take their operations elsewhere (as Goldman Sachs recently did, moving some of its employees to Florida), then New York’s continued economic decline will not be easily reversed.

However, if business owners and wealthy residents can see that their additional tax dollars are funding a better and more effective government and that the additional tax dollars they are being asked to pay are tied to a clear and present emergency, they will feel confident that the fiscal ship will soon be back on smoother waters, with enlightened management at the helm.

And making government more efficient and effective is in everyone’s interest. New York City’s annual budget ballooned to $88 billion last year, up from $68 billion just seven years ago. Has that additional $20 billion in annual spending under Mayor Bill de Blasio led to better delivery of services? Are there fewer homeless people on the streets? Are our streets cleaner? Are the public schools significantly better? If you answered no, no and no, you get the idea that just throwing more money at chronic problems won’t lead to long-term solutions.

Of course, this leads to an important question: Is it even possible for the city and state to become more responsible fiscal stewards? Yes. Take the city, for example: Through attrition in certain agencies, the city government could easily shed some of the bloat in personnel that has steadily increased during the last seven years (with city headcount up more than 30,000 municipal workersunder de Blasio). Negotiating productivity and efficiency agreements with municipal unions is not only long overdue, but would also send a message to all New Yorkers that, in spending our tax dollars, we are actually increasing and improving vital services and not wasting them on boondoggle programs.

Another important component of any tax hike must be reframing these hikes not as punishment, but as meeting an immediate need. This is why strict sunset provisions are so crucial, ensuring that these tax hikes will expire once we have fought our way out of our “once in a century” health and economic crisis, rather than becoming permanent fixtures in the tax code as has happened with so many other “temporary” taxes. Doing so would be an important part of convincing the key economic players that we are asking to pay more not to leave New York and instead to stick around to be a part of our economic recovery.

For decades, New York has had the luxury of raising taxes on businesses and wealthy residents without losing large numbers of them to other jurisdictions. COVID-19, however, should give all of us pause before we assume that what has held in the past will continue to hold going forward. Not only have many of the magnets that have traditionally bound these interests to New York been significantly diminished by the pandemic, but business leaders and the wealthy have now seen that they can successfully operate remotely. Losing even a small portion of this cohort of organizations and individuals would doom New York to a ruinous fiscal and economic future.

By contrast, with just a few key modifications, it should be possible to get the buy in of many of those targeted by the proposed tax hikes without “killing the golden goose” that has helped make New York what it is today. In this way, we can turn what is now an us-versus-them dynamic into an us-with-us dynamic that actually makes city and state coffers less bare, while also making our city and state governments more effective – a win-win scenario if ever there were one.

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.