Next, lawmakers should completely abolish New York's estate tax, which penalizes family-owned and closely held businesses. This tax has accelerated a brain-drain and capital flight to Florida, South Carolina and elsewhere. A 2004 National Bureau of Economic Research paper concluded that a 1 percent differential in estate-tax rates was associated with a 4 percent reduction in the number of residents in a given state. Clearly, New York's estate tax is pushing residents out.
Lawmakers in Albany may not know it, but the class war they're waging against the rich is actually robbing the state's non-rich of the capital necessary to create new technologies, new businesses, new equipment, new jobs and new job training. It's a nonsensical policy that must be ended.
As for income taxes, lowering the tax rates on personal income (6.85 percent) and corporate income (7.5 percent) both to 5 percent would raise the after-tax rewards for the entire state tax system. That alone would generate significantly higher living standards in New York and more rapid economic growth. Complexity can also be addressed. Instead of five income brackets, why not three wider brackets and inflation-indexing to prevent bracket creep? For businesses, all new investment could be cash-expensed to reduce complexity and lower the cost of capital.
New Yorkers have seen economic-growth tax principles work successfully in the past. When President Reagan and Gov. Hugh Carey lowered tax rates nationwide and statewide in the 1980s, New York shared in the U.S. economic boom. In the 1990s, Gov. Pataki's tax-rate reduction plan produced new jobs at a pace equal to or better than the U.S. average. President Bush's 2003 tax cuts on capital gains and investor dividends ignited New York's financial service and related industries, where employment, incomes and tax revenues all soared.
A complete restructuring of New York's tax system would provide relief to taxpayers in every income class and would set the state apart as the place for uninhibited growth and investment opportunities. In-migration will replace the population drain. Instead of voting against New York, people will vote for it with both their feet and their money.