Home Rule in a World Economy

December 4, 2011

I live in New York State, often thought of as the land of high taxes and the home of Wall Street.

Current debate in New York has to do with what is called a “millionaire’s tax” which is really just a graduation of income tax rates as incomes rise.

Today, the NYS income tax on a typical New York family is 6.85% on taxable earnings up to $300,000 annually.

The‘surcharge’ starts to kick in when taxable household income for a family exceeds $300,000, causing incremental taxable income over $300,000 subject to NYS Income Tax at a rate of 7.85%, and at $500,000, the marginal rate then rises to 8.97%.

Now let’s take a look at a family in New York State with an annual taxable income of $750,000.

That is about $14,400 per week.

If the “millionaire’s tax’ expires, this family will save about $7,300 at tax time, which equates to $140 per week.

Meanwhile, the Empire State is facing a potential $3.5 Billion deficit in the coming year.

Why would Governor Cuomo not support the extension of this surcharge on the highest earning households?

On another level, one danger of having an uneven income tax landscape in adjacent states is that these highly compensated individuals can easily relocate — note that Greenwich, CT has become the capital of the hedge fund industry; and that downtown Stamford, CT is home to several large investment banking operations (UBS & RBS).

There is currently an effort by the State of Ohio to bring the headquarters operation for Sears from the Chicago area where it’s been forever, to the Columbus area.

Illinois claims they are not in a position to offer hundreds of millions to Sears to retain their operations there; meanwhile, Ohio — with nothing to lose and plenty to gain — is willing to offer a $400 Million incentive package as an inducement to bring 10,000 jobs and all of the ancillary spending that accompanies such an operation.

This news made me stop and think — while our local towns, counties, cities and states are working hard to cannibalize each other, we lose sight of the world economy, and when jobs move overseas, citizens in the U.S. get up in arms, surprised and shocked.

I’m all for ‘home rule’ to a point — but when home rule decisions result in zero sum solutions which have short term benefit (offset by short term loss) to one local region vs. another– accompanied by serious long-term negative impact on our entire nation — we have a flawed public policy that needs immediate attention.
The Walrus thinks it is time to rethink our entire system in the U.S.A. to – hopefully – make it more relevant and competitive in our current world economy…..

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