Make New York less expensive
At the center of the coronavirus, New York State has experienced a horrific loss of life and an alarming evisceration of state and local budgets. If the state is to recover from the impact of the pandemic and recent civil unrest, it must reduce costs and make the state a less expensive place to do business.
The state and its local governments face dangerous budget gaps and potential financial meltdown. Almost 2 million New Yorkers have lost their jobs in the wake of the pandemic shutdown, almost twice as many as in Florida and Texas; the state’s revenues are not expected to recover until 2024. New Yorkers need to face the reality that the state must change its traditional tax, spending and regulatory policies if it is to prosper.
Moreover, the pandemic has upended traditional office arrangements as many businesses go remote. It is unlikely all these employees will return, creating uncertainty for commercial real estate, especially in New York City. Looting of retail businesses, a sector already weakened by the virus shutdowns and online sales, made matters worse.
Even before the coronavirus, economic trends affecting New York were alarming. Since 2010, more than 1.4 million have voted with their feet, seeking lower taxes and better job opportunities elsewhere. The state will lose one, and possibly two congressional seats after the 2020 Census is completed, further diminishing its clout in Congress.
The state ranks at the bottom among the 50 states as one of the least desirable places for business. High income and property taxes, crushing regulations, exorbitant energy and health insurance costs make the Empire State singularly unattractive for investment. Major manufacturers will not even consider locating in New York unless they are induced (some would say bribed) with tax dollars.
The Albany-based Empire Center for Public Policy has proposed a series of steps the state should take to address immediate financial shortfalls, as well as long-term policy changes to address underlying issues.
First, an estimated $1.9 billion in state and local public employee raises for the coming year should be frozen. Having lost 22% of private-sector jobs due to the coronavirus, it makes little sense to continue public sector raises this year. Minimum-wage increases and expansion of prevailing-wage mandates recently adopted by the Legislature should also be halted.
Second, local governments and school districts should be given more flexibility from costly mandates, particularly those imposed by state laws governing labor negotiations. Such reforms would alleviate pressure on sky-high property taxes.
Third, the state should avoid the temptation to raise taxes, as demanded by progressives. Approximately 40% of state income taxes are already paid by the top 1% of taxpayers. Further tax increases on this highly mobile group of taxpayers will likely drive more successful New Yorkers to tax havens such as Florida.
Instead of simply asking for federal help, New York should also consider helping itself by repealing laws that make the state too expensive. Alone among the 50 states, New York imposes a legal standard of “strict liability” for injuries incurred in a fall on a construction site. Moving to a “comparative negligence” standard as in the 49 other states would reduce public and private construction costs by five to seven percent. Why should federal taxpayers subsidize this trial lawyer boondoggle?
We all know health insurance is expensive, but few citizens realize that New York raises those costs by placing hidden taxes on their premiums. Employers and consumers pay $4.9 billion each year in health insurance taxes to Albany. The Empire Center estimates those taxes increase premium costs by approximately $440 per person.
The response of the progressive left to New York’s imminent fiscal crisis is more of the same. If we hope to grow jobs and new businesses, such a path would be a disastrous mistake. Reform government to attract people, business and growth instead.