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Thursday, April 2, 2009
4:26 PM EDT
Kelly William Cobb

New York vs. New Jersey: The Battle for Higher Taxes

New York and New Jersey are locked in an epic battle.  The fight: which state can raise the tax burden the highest until virtually every resident and business just leaves.

In mid-march, we reported on New Jersey's attempt to turn the Garden State into a depopulated ghost town by raising $1 billion in taxes on individuals, businesses, homeowners, and consumers.  As a result of having raised more taxes than any other state since 2002 (a combined $22 billion), the Garden State has seen hundreds of thousands of residents flee for low tax states like Pennsylvania and Florida.

Not to be outdone, this week New York countered with $7.8 billion in tax hikes as part of the state's FY09-10 budget.  The $131.8 billion budget agreement, reached in completely closed door sessions by Gov. David Paterson (D), Speaker Sheldon Silver (D), and Senate Majority Leader Malcolm Smith (D), has been passed by the House and will likely pass the Senate today.

The bill will raise the personal income tax to 8.97%, matching New Jersey.  It also gives New York City residents the highest income tax rate in the nation at 12.62%.  Additionally, the bill contains over $3.8 billion in other taxes and fees, including on rental cars, cigars, beer, wine, and internet sales.

In a resounding victory for fiscal imprudence, the budget will give the Empire State the worst-ranked business tax climate in the nation - stealing the number one spot away from rival New Jersey.  Not surprisingly, the Empire Center and Beacon Hill Institute have found that the budget will cost the state over 15,500 private sector jobs.

Over the past ten years, spending in New York has increased a disturbing 38.9%.  At the same time, the Empire State had a net loss of residents every year totaling over 1.9 million people who fled for lower tax states – the highest migration outflow of any state.  Taxpayers who left New York took with them a total of $39.9 billion in income and wealth.  Many of whom found themselves, like New Jersey exiles, in Pennsylvania and Florida.

ATR's full press release is below or click here for a PDF.

 
New York Budget a Slap in the Face to Taxpayers
Budget Contains Billions in Taxes and Fees; Drastically Increases Spending
 
Washington, D.C. – Americans for Tax Reform today strongly condemned the budget agreement reached by New York Governor David Paterson (D), Speaker Sheldon Silver (D), and Senate Majority Leader Malcolm Smith (D). The budget, which is currently under consideration by the New York legislature, would drastically increase taxes and fees by $7.8 billion.
 
The budget would bring the top income tax rate to 8.97%, matching New Jersey, but significantly higher than neighboring Connecticut, Pennsylvania, and Massachusetts. It would also give New York City residents the highest income tax rate in the nation at 12.62%. While the agreement eliminated a number of proposed tax hikes on soft drinks, digital downloads, and cable and satellite television, it continued to raise other taxes and fees by at least $3.8 billion, including on rental cars, cigars, beer, wine, and internet sales.
 
"It's as though New York’s severe overspending problem has taught the governor and legislative leadership nothing about governing,” said Grover Norquist, president of Americans for Tax Reform.  “Governing means making tough decisions, not passing massive tax increases and dramatically increasing government spending while families are getting hit by a recession and cutting back. That’s not a tough decision – it’s an abdication of leadership and an insult to New York taxpayers.”
 
The budget also increases spending by $12 billion over last year, a 9.8% increase. Over the past ten years, New York has increased spending by a staggering 38.9% when indexed for inflation. During the same time, the Empire State had a net loss of residents every year totaling over 1.9 million people who fled for lower tax states – the highest migration outflow of any state.  Taxpayers who left New York took with them a total of $39.9 billion in income and wealth.
 
“Instead of choosing to stop New York’s big-government juggernaut, the legislature recklessly aimed it straight at taxpayers, consumers, and small business,” added Norquist. “New York has seen more people flee its oppressive tax code than any state in the country. Under this budget, Governor Paterson, Speaker Silver, and Leader Smith can look forward to the continued erosion of the Empire State’s tax base.”
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