Taxes & Spending

Will New York City become the next Detroit?

Will New York City become the next Detroit?

New York City just elected a proud and ambitious left-winger, Bill de Blasio, to be the mayor. He plans to raise taxes again and spend yet more money.

Will New York City become the next Detroit?

Detroit was once the center of American manufacturing. Ford, Chrysler, and General Motors stood astride the world economy. Michigan and Detroit’s high standards of living seemed immortal, immune to economic challenge.

But decades of liberal mayors brought the city to bankruptcy and moved much of automobile manufacturing overseas or into Right to Work states. The population of Detroit fell from 1,850,000 in 1950 to 701,000 today. It continues to fall.

Is New York City next? Is Wall Street immortal? Immovable?

The storm petrels have given warning for years.  John Lindsay, the liberal Republican who then ran for the Democrat nomination for president, gave municipal labor unions a blank check. Surely the financial center of the world could pay for gold-plated pensions and benefits without breaking a sweat. Taxes rose. The middle class began to flee crime and taxes.

New York City has the largest big city tax burden in the nation. The highest income earners owe 12.7% of their personal income to the government, second in the nation only to California. With a 2013 budget of about $69 billion and just over 8.3 million residents, the city is spending more than $8,273 per resident. The second largest US city, Los Angeles, by comparison spends $1,137 per resident.

Between 1992 and 2010, on net,  New Yorkers leaving the city to work and live elsewhere brought with them an annual income of $48.8 billion. Between 1995 and 2010 — although the population of New York state rose 1,285,000 — the state lost on net more than $58.6 billion a year due to high net worth out-migration.

The vast majority of people and income fleeing New York are leaving the city. The relative hollowing out of northern New York is a small fraction of those leaving Gotham city. And these financial numbers are net. They take into account that some people move into the state and city—but net more income is leaving the state and city than entering. And the population relative to other states is declining such that New York had 47 electoral votes in 1950 and only 29 today.

It is difficult to move a manufacturing plant or build a new automobile assembly line in South Carolina or Tennessee. It is less difficult to have the computerized, virtual world of banking, investment and finance move across city, state, and national lines.

De Blasio’s inauguration was a celebration of the welfare state and demands for higher taxes and more government spending. The Obama campaign should remind us that when liberals promise to break the bank, spend without end and view taxes as free money, it is not a figure of speech. It is a plan. This is not cheap rhetoric for the left’s base…it is a promise.

De Blasio has already announced his first target: increasing the top income tax rate paid by those earning more than $500,000 from 3.86% to 4.4%. This, if no one flees or retires, will raise $530 million in higher taxes. This tax is advertised as the funding source for “high quality” full day universal preschool in New York City that the New York Citizen’s Budget Commission reports will cost the city between $619 million and $896 million depending on the per pupil funding formula.

So all this happy talk about taxing the rich is clearly only the first part of the sentence. “We will tax the rich….first.” Somehow and from someone’s hide the Mayor will have to raise another $89 million – $366 million per year in higher taxes to finance his first territorial demand.

Remember that the mayor was elected with the enthusiastic support of the public sector union bosses whose wish list for higher pensions, benefits, and pay would embarrass the Detroit union bosses.

Such tax hikes would be on top of the 18.5% property tax increase in 2002. (Mayor Bloomberg had demanded a 25% hike).

Raising the income tax in New York City will require the approval of the New York State legislature and governor. Republicans who have marginal control of the state Senate have promised to stop any such state approval.

The special spending interests that backed De Blasio have been promised taxpayer money. It is now the new mayor’s “job” to find those billions in the pockets and savings accounts of those who stay behind in New York.

De Blasio is practicing “trickle down” taxation. He promises to tax only the rich, but such taxes always trickle down to hit the middle class.

We have seen this movie before.

Norquist is president of Americans for Tax Reform. Follow him on Twitter at @GroverNorquist

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