Despite loads of taxpayer dollars sitting in New York City's coffers (an estimated $3.4 billion dollar surplus this year), tax cuts are not in the game-plan Mayor Bloomberg said yesterday.
E.J. McMahon of the Manhattan Institute told the New York Post this is really bad news. "You're talking about the most heavily taxed big city in the country, which happens to be in the mode where it can do some tax cutting.
McMahon warned the city's high taxes would one day take their toll on the economy.
"Something in him thinks taxes don't matter because they never mattered to him," he said of the mayor.
I wrote a column in The Wall Street Journal back in January ("Low-Tax Tiger") discussing the tax reform commission I chaired at Governor Pataki's request.
"[W]e concluded that there is a clear relationship between state tax burdens and state economic health. States with high and rising tax burdens are more likely to suffer economic decline; those with low and falling tax burdens are more likely to enjoy strong economic growth. Academic studies, as well as real-world experience, show clearly that low-tax states consistently outperform high-tax states.
...It is absolutely essential that New York be more competitive in the global race for capital. New York competes regionally, nationally and internationally. What is overlooked, however, is the state’s need for new capital and new capital formation. New jobs require new businesses, and new business formation requires new capital sources. Nothing will make New York more prosperous than improving its economic climate to make the state a more hospitable place for the treatment of smart money and smart people. We compete daily with low-tax states elsewhere in the U.S. and with newly attractive destinations for capital in places like Russia, Eastern Europe, China and India. Smart money and smart people are highly mobile. In the world race for capital, they go to where the return on capital is highest."
The same applies to New York City.