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Thread: weekend commentary - New York has 'Priced' itself out of the market !

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    Banned Melonie's Avatar
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    Default weekend commentary - New York has 'Priced' itself out of the market !

    some disturbing facts and figures to be sure ...


    (snip)"New York Prices Itself Out Of The Market

    Fiscal Policy: Anyone who believes high tax rates bring prosperity need only look at New York. Soak-the-rich rates there contribute to a wealth and talent drain the state can't afford.

    To help their state weather the recession, New York lawmakers in 2009 adopted a surcharge on personal income taxes for those making more than $200,000.

    Called a "millionaire's tax" even though 76% of those who pay it are not millionaires, the levy lifted the top rate by 31%. It was intended to be temporary.

    But according to a report by the Partnership for New York City, a group of 200 CEOs, "interest groups that depend on state spending are pressing for permanent extension of the surcharge."

    With New York already having the second-heaviest state tax burden in the country, according to the Tax Foundation, this would be a mistake.

    According to the partnership, the rich and the productive have been leaving the state for "places where the tax burden is less" for years.

    "Between 1998 and 2008, a net total of more than 1.7 million New Yorkers chose to relocate, taking with them their wealth and talent," it says. "More income has left New York than any other state in the nation — $71.7 billion from 1993 to 2008."

    The average net worth of those moving out of the state was $338,000. By contrast, the average net worth of households moving into Connecticut was $625,000 while those moving to New Jersey were worth nearly $653,000.

    The group also says a "significant portion" moved to Florida and Texas, "two states with no state or local income taxes, a very low cost of living, and a reasonable and predictable regulatory environment in which to conduct business."

    "Both states," says the partnership, "have prospered as a result."

    As profound as the exodus from New York has been since 1993, it actually picked up after the "millionaire's tax" was imposed in 2009. The number of New York taxpayers worth $1 million or more fell 9.4% from 2007 to 2009, from 381,786 to 345,892. It will only grow worse if the surcharge is made permanent.

    Some wealth did move into New York between 1993 and 2008, but it was not enough to replace what was lost. For every dollar the state gained, $1.71 left. No other state had a worse ratio.

    The loss of wealthy residents translates into lost business opportunities and poor job creation. It also adds to the tax burden of those who remain. Is that what Albany lawmakers had in mind when they decided to strong-arm the rich?

    Most of the country is watching Wisconsin, where the governor is doing the right thing to balance the budget. But much could be learned from New York, where for decades lawmakers have been doing things wrong."(snip)

    from


    Perhaps this at least partially explains why NYC exotic dancer earnings potential is not what it once was ! And to make matters worse, in some cases the NY income tax surcharge winds up taking just as many tax dollars out of dancers' pockets even though their income level has declined !

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    Default Re: weekend commentary - New York has 'Priced' itself out of the market !

    You guys seem to be in a tight spot - your well-off and rich people will flee more taxes, but they're currently massively undertaxed compared to the rest of the world and the lower income brackets, driving the government broke even quicker. Where's the money meant to come from to fund your debt?
    Once again, the conservative, sandwich-heavy portfolio pays off for the hungry investor
    - Dr John Zoidberg

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    Default Re: weekend commentary - New York has 'Priced' itself out of the market !

    Where's the money meant to come from to fund your debt?
    At the US federal level, the most probable answer is 'the Federal Reserve's Printing Press !"

    However, at the state level, like the Eurozone countries that are locked into the use of a common currency, US state gov'ts do not have the luxury of simply printing up money to pay for their current spending as well as debt repayment. They also have a legal mandate that their annual budgets must be 'balanced' ... with an admitted HIGH level of 'creativity' re accounting.

    For a state like New York, the budget situation is very difficult ...

    - an estimated 7% of state residents are state or local gov't employees, whose paychecks are 100% funded by tax revenues ( or borrowed money )

    - roughly 2% of state residents work for nominally private sector businesses working 'under contract' to state and local gov'ts, whose paychecks are also heavily funded by tax revenues ( or borrowed money )

    - a roughly estimated 5% of state residents are 'fully dependent' on gov't social welfare programs, which are 100% funded by tax revenues ( or borrowed money )

    - a roughly 3% of state residents are receiving state or local gov't pension payments, which are exempt from state and local income tax as well as being partially funded by tax revenues ( or borrowed money )

    - a roughly estimated 44% of state income tax filers either pay no net state income taxes or receive 'free' money in the form of refundable state tax credits.

    - a roughly estimated 4% of state residents are collecting extended unemployment benefits, which are partially exempt from state and local income tax as well as being partially funded by tax revenues ( and huge amounts of borrowed money )

    - New York has both one of the highest marginal state income tax rates, plus THE highest disparity in incomes between 'rich' and poor. Thus 'rich' New Yorkers pay a proportionately higher share of their earnings towards state and local income tax revenues than any other Americans.

    ... all of which has arguably led to a situation where <49% of NY state's population are actually paying into state and local income tax revenue dollars, but where >51% of registered voters arguably directly benefit or at least are not personally adversely affected by supporting additional state and local tax increases ( over spending cuts on public sector employment, on social welfare benefit programs, public works projects etc. ).

    This in turn leads to a high probability that additional state and local tax rate increases will be enacted, with a minimum of state and local gov't spending cuts, when 'push comes to shove' re balancing state and local budgets. But the high probability of additional state and local tax rate increases, combined with NY's high level of income disparity, will provide even stronger motivation for New Yorkers who earn more than $200k a year to 'vote with their feet'.

    And indeed, because of the same progressive state and local income tax rates and income disparity, every 'rich' New Yorker who chooses to move out of the state 'denies' state and local gov't coffers a LARGE amount of former tax revenue. While the particulars are hard to track down, it is speculated that the combined state plus local effective tax rates on 'rich' New Yorkers is on the order of 12%. Thus for every person with a 1 million dollar income who leaves New York, $120,000 in lost tax revenues must be recouped from remaining New Yorkers.


    they're currently massively undertaxed compared to the rest of the world
    Again while the particulars are hard to track down, it is asserted that the de-facto combined federal plus state plus local income tax rate of 'rich' New Yorkers is above 50% ... which hardly constitutes being massively undertaxed. Granted that many 'rich' New Yorkers also attempt to 'game the system' via partnership investments in tax favored business ventures ( famous example David Letterman being a big player in corn ethanol ... which yields large amounts of tax credits that can be directly applied against other income taxes due), via heavy investment in triple tax exempt municipal bonds ( famous example John Kerry, where 80% of his total income stemmed from muni bonds yielding a de-facto 12% overall income tax rate ), via secure offshore investments etc. But this is not much different from 'rich' Europeans resorting to Lichtenstein / Monaco etc. to shield their own high incomes from very high official tax rates.


    the lower income brackets, driving the government broke even quicker
    Agreed. Working New Yorkers don't actually contribute net income tax revenues until their income exceeds $45k a year or so ... with low skill level near minimum wage New Yorkers actually collecting tax credit payments ( funded by higher earning New Yorkers who actually contribute positive net income tax revenues to state and local coffers )

    and in addition, New York continues to act as a 'magnet' re attracting low income immigrants thanks to it's 'compassionate' social welfare benefit policies ...

    (snip)The dirty little secret of New York's version of welfare reform is this: You don't have to do a thing to collect your government check, just like in the bad old days of the entitlement culture.

    A welfare mother here can thumb her nose at every demand the government makes of her - she can skip appointments with her welfare worker, refuse to take jobs offered her, and sit home all day watching Jerry Springer - and still pull down three-quarters of her welfare check, as well as her full allotment of food stamps and Medicaid. (In real welfare-reform states, work-refusing recipients lose their full check, while keeping food stamps and Medicaid.)

    The public may not know about this gaping hole in New York's "reform," but welfare recipients found it long ago. By now, nearly half (48 percent) of New York City's welfare caseload is refusing to participate in work activities or violating another requirement - but they're getting paid anyway.

    Don't attribute this high non-participation rate to incapacity. These welfare scofflaws are all able-bodied; they just believe they're entitled to government support whether or not they put out any effort in return.

    And don't think that the work requirements may just be too onerous to comply with. New York City requires at most 20 hours a week in some sort of work activity (which can include simply looking for a job); mothers with children younger than 6 have to spend even less time trying to become self-supporting.

    These entitlement holdouts are the untouchables of the welfare rolls: Welfare administrators have no leverage over them, since an administrator may impose no sanction for rules violations beyond the 25 percent cut in the monthly check. The likely result? Lifetime welfare receipt.

    The other secret of New York's supposed welfare reform is that there are no time limits. In the rest of the country, after five years on the dole, you're off. Again, not in New York. The state ignores the federal time limit and lets recipients stay on its rolls indefinitely - at the state's exclusive expense.

    Recipients long ago figured out that the alleged time limits are a sham: Over a third of all welfare families stay dependent on the system beyond the federal five-year time limit, and 35 percent of those veterans violate work rules. The welfare rolls now hold three people who've exceeded the five-year federal limit for every two who haven't - a worrisome trend. (snip)


    PS I assume you are aware that I am a former New Yorker who now resides way south of the border ? I ran the math 2 years ago, and decided to 'vote with my feet' while I still could.

    ~
    Last edited by Melonie; 02-27-2011 at 06:33 AM.

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    Default Re: weekend commentary - New York has 'Priced' itself out of the market !

    Maybe N.Y. will start selling off highways and bridges as other states have done. Ed Rendell seriously proposed selling the Pa. Turnpike; Daniels sold a highway in Indiana. The best example was Mayor Daley selling the parking meters in Chicago.

    It amazes me that politicians are so short sighted. They'd rather get a one time billion dollar infusion to plug a bidget hole than issue bonds backed by the tolls or parking meter revenues.

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