While Frank Sinatra wanted to wake up in a city that doesn’t sleep, today’s New Yorkers are looking to live in states where taxes aren’t so steep.
New York, whose state and local taxes are among the highest in the nation, is bleeding residents due in large part to the state’s extraordinarily high tax rate. According to a new study by The Empire Center for New York State Policy:
From 2000 to 2008, in both absolute and relative terms, New York experienced the nation’s largest loss of residents to other states—a net domestic migration outflow of over 1.5 million, or 8 percent of its population at the start of the decade.
Of those who left, 1.1 million were former residents of New York City. That means that the Big Apple lost one out of every seven city taxpayers.
And it’s not New York City’s giant sewer rats that are driving people away.
From the folks at the Empire State Center:
Click here to view the embedded video.What accounts for New York’s chronic inability to attract and retain more Americans than it loses every year? Any attempt to answer that question must begin with New York’s state and local tax burden, perennially ranked among the heaviest in the country. Taxes aside, likely explanations differ regionally. Downstate residents face high taxes and housing costs rated among the most “severely unaffordable” in the world. Land-use regulations in downstate New York also tend to inhibit growth. In upstate New York, housing is relatively inexpensive but even more heavily taxed, and new economic opportunities have been scarce.
While one-third of outbound New Yorkers seek sunnier clime and fresh-squeezed orange juice in Florida, that doesn’t mean that cold weather is the motivating factor behind the migration. The Empire Center notes that New Hampshire, Wisconsin and Minnesota have all seen increases in population, while New York’s has been shrinking.
The study’s prognosis? New York needs to change its ways:
This much is clear: with New York now facing the most serious fiscal and economic crisis in its modern history, government policies should be aimed at slowing down and ultimately reversing the state’s population drain.
One famous conservative has already pledged to leave. Last March, radio show host Rush Limbaugh, whose show is broadcast from Manhattan, proclaimed that he was “officially vacating New York” because he doesn’t want to foot the bill for a bloated government:
It’s punishing the achievers for the mistakes and the lack of discipline on the part of a bunch of corrupt politicians that have run that city and state into the ground for I don’t know how many years — and I, for one, am not going to take the blame for it.
Perhaps some tax cuts and fiscal responsibility are in order.
To help pay for its expensive and painfully complex health care bill, Congress plans on burdening families and small businesses earning over $350,000 with a surtax. Ill-conceived “soak the rich” plans devised by Congress tend to inspire a yawn, a sigh, or applause from the vast majority of citizens who don’t have to actually pay the lopsided amount of taxes that the “rich” pay. Well, as it turns out, more and more of us might actually be “rich” enough to have to chip in to help fund government-run health insurance for the masses.
The surtax proposed by Rep. Charlie Rangel (D-NY) would stand independent of the income taxes Americans are already paying. Generally, a surtax is added onto an individual or business’s taxable income. However, in a maneuver to include more tax-filers into Congress’s double-tax treasure chest (or triple-tax if you invest in anything), Congress has decided to make the surtax applicable to your adjusted gross income, or AGI. Your AGI is what your income looks like before you take out deductions like state and local taxes, medical expenses, and mortgage interest payments. So it’s a higher number than your taxable income.
How much higher? American tax-filers reported over $8 trillion in Adjusted Gross Income in 2006, yet they were only taxed on less than $5.5 trillion of it. The difference between those two numbers might be able to pay for the current health care plan twice! Only 68% of the adjusted gross income of U.S. taxpayers was actually taxable in 2006, yet the current proposed health care bill wants to change the rules and start taxing even more money to help “control” health care costs.
So how does this surtax work? The government would take 1-5.4% from those families and small businesses with an AGI greater than $350,000 ($280,000 if you’re a single filer). Let’s say you’re a small business owner in Baltimore, Maryland with an AGI of $1,100,000, the amount listed in box #37 of your IRS 1040 form. Under this plan you will be taxed 5.4% on that $1,100,000, which comes to a bit more than $59,000. However, when calculating your income tax liability, the government provides you the option of applying a multitude of itemized deductions, found on a Schedule A Form. The total of your deductions can then be filled in on the second page of your 1040. So if you’re paying a 5.5% Maryland State tax, a 3.05% local tax, $5,000 in mortgage interest payments, and another $3,000 in medical expenses, those deductions would help lower the amount you’re liable for by way of income tax, but wouldn’t put a dent in your surtax contribution. In fact, the small business owner would pay approximately $15,000 if the surtax applied to his taxable income, but because it applies to his AGI, he or she has to pay more than $59,000. That’s more than a $44,000 difference! That $44,000 might force the business owner to cut costs somewhere, and that could mean somebody’s out of a job.
And if that’s not enough to cast doubt on the proposed tax hike, the surtax may actually increase in 2013. If the President and Congress are intent on saving or creating jobs, and allowing small businesses to compete on a level playing field, this surtax doesn’t match the rhetoric.