They Came, They Saw, They Taxed
New York’s progressive legislators want to make the nation’s heaviest tax burden heavier still.
April 6, 2021 | Steven Malanga | City-Journal.org
With its new package of whopping tax increases, New York State’s Democratic-controlled legislature has crossed over a metaphorical fiscal Rubicon. Over the last century, Albany has legislated its way to the nation’s highest tax burden largely during times when governors and legislators pleaded fiscal emergencies as their rationale for steadily higher taxes. Now, however, the legislature’s Democratic caucus, which back in November captured super-majority control over Albany, is raising taxes not because it claims it needs to but simply because it can. Given that the pandemic has increased the already-massive disincentives for doing business and living in New York, this latest round of increases, designed to funnel another $4.3 billion out of the state’s private sector and into government, will test the progressive notion that taxes don’t influence people’s decisions on where to live or do business.
New York State created its income tax in 1919, after the federal Wartime Prohibition Act followed by the Eighteenth Amendment to the Constitution banned the sale of alcohol, depriving the state of a valuable excise tax. Income taxes filled the fiscal gap, but the end of Prohibition in 1933 and the resumption of liquor sales didn’t bring an end to the income levy. Instead, pleading necessity amid the Great Depression, New York raised the income tax rate to a heady 8 percent. And so it has gone for decades, with some of the state’s biggest increases coming during periods of fiscal emergency, like tax hikes following the back-to-back recessions of the late 1960s and early 1970s, when the state chose higher taxes over reduced government to fill fiscal gaps created by its own free spending. Occasionally the tax boosters, ranging from liberal Republicans to moderate Democrats, would acknowledge the worrying trend of ever higher levies, as when Governor David Paterson said back in 2008 that friends of his in the business community had told him in response to Albany’s latest tax increases, “Good luck in New York state, but we can’t pay the taxes. The opportunities aren’t there.”
But now legislators aren’t even pretending that New York is in a fiscal crisis. Instead, the latest tax increase is designed to fund a wish list of progressive ideas, from more school aid (for a state that already spends more per pupil than any other) to higher Medicaid spending (in a state that already runs the most expensive program in the country). The new, high-tax-fueled budget also includes funds to aid illegal immigrants and bail out tenants behind on their rent.
