Cox: Here's how Andrew Cuomo can fix NY's sky high taxes
By Ed Cox
A rumor reported by the Albany Times-Union blog Capitol Confidential last week has it that at a recent fundraiser on Long Island, Gov. Andrew M. Cuomo told those attending that he would reduce taxes next year.
New York Republicans have been urging him to do just that for two and half years. We're glad he's finally starting to listen.
New Yorkers are overtaxed. Our per capita state and local tax burden is the highest of any state and well above the national average.
According to the IRS and the Census Bureau, a net of almost 1 million New York taxpayers have left since 1992, taking more than $68 billion in annual taxable income with them -- about 15 percent of our present total taxable income.
If the governor is serious about promoting tax reform, he can start with the personal income tax. The top destination for those tax refugees from New York was Florida -- a state with no personal income tax. That's no fluke -- the top 10 most popular destinations for those who have left have an average personal income tax of 2.9 percent, 6 points lower than New York's top rate.
Cuomo boasts that taxes in New York are the lowest they've been in 60 years, but his tax system "overhaul" only saved households making $300,000 or less about $155 per year. The governor has used that aspect of his tax policy to disguise the fact that other tax increases led to a net tax increase of nearly $2 billion -- and a continuing exodus of taxpayers.
New York needs real, substantive cuts in income tax rates across the board to keep jobs and citizens here.
Changing the way the state taxes capital gains would send a clear signal to the rest of the nation that New York, as the governor claims in his slick ad campaign, is indeed "open for business."
Unlike the majority of states and the federal government, which tax capital gains at a lower rate in order to encourage investment, New York treats capital gains as ordinary income. As such, New York's effective tax rate on capital gains, when combined with the federal rate, is the fifth highest on the planet: Only Denmark, California, France and Finland levy higher rates.
History shows that when capital gains rates are cut, revenue rises. Yet no such proposal has been considered in constructing any of Gov. Cuomo's three budgets.
Reducing long-term capital gain rates over time while reining in spending would harness the most powerful tool for fostering economic growth: entrepreneurial activity.
Property taxes are another culprit, and have increased over 73 percent since 1998 -- more than twice the rate of inflation -- leaving New Yorkers with a median property tax rate that dwarfs the national average. The property tax cap passed in 2011 can slow the increase, but the governor can go further and reduce property taxes by addressing Albany's addiction to unfunded mandates on New York's counties and cities.
Enforcing Albany's mandates requires revenue, but when the state doesn't provide funding to make sure mandates are met, counties must pay for the mandates themselves, usually by raising property taxes.
But perhaps the clearest signal that Cuomo is ready to take tax reform seriously would be for him to repeal the tax hike that he implemented earlier this year.
The governor extended the utility tax surcharge that was set to expire starting this year. This tax costs New Yorkers more than $500 million annually and affects all energy consumers, including nonprofit organizations, schools, small businesses and individual households. A 2010 report from the Public Policy Institute found that over 26 percent of New Yorkers' electric bills went to support state and local taxes. That's a large part of the reason New Yorkers pay some of the highest energy costs in the nation.
Andrew Cuomo put on our fiscally responsible Republican clothes when he ran for governor in 2010. Since then, he has tacked hard to the left to raise his profile with the base of his Democratic Party. But if he wants to leave New York State better than he found it, tax reform is a good place to start.