Bad Tax Policy Proposals in New York

Well, apparently some lawmakers in New York are concerned that politicians in neighboring New Jersey might get ahead of the Empire State in terms of bad economic policy decisions.

In a March 5 BusinessTrends Blog posting, I noted the push for paid family leave in New Jersey, and the fact that the Garden State already ranked 50th on the “Small Business Survival Index 2007.”

Meanwhile, big government New York ranked 46th on the Index, or the sixth most costly public policy climate among the 50 states and District of Columbia.

Now, there are all kinds of talk in New York about possible tax increases. For example, news reports note the following:

• Various health groups are pushing to double the state’s cigarette tax from $1.50 to $3.00 per pack. New York City imposes its own $1.50 tax on top of the state tax, and Mayor Michael Bloomberg wants to jack up the city tax by another 50 cents. If all of this were to pass, the cigarette tax in New York City would tally up to $5.00 per pack. That’s a surefire recipe for raising costs for consumers and small business retailers, and expanding the underground economy, including smuggling and criminal activities.

• The Democratic majority in the state assembly and others are advocating a state income tax increase. One plan would increase the top tax rate from 6.85% to 7.7%, while the Working Families Party is pushing for an increase as high as an additional four percentage points. New York already is a relatively stagnant state in terms of population, economic growth and entrepreneurship. Higher income taxes would only make matters even worse, by chasing away entrepreneurs and investors.

Is there hope? Well, Governor Eliot Spitzer (D) does not like the higher income tax idea. He was quoted in the March 6 New York Times saying: “That is not something that we can afford to do. The idea that we would turn around at this moment and start raising taxes is the wrong way to go.”