Archive for September 2020

The tax man cometh – By George J. Marlin

September 25, 2020

The following appeared on Tuesday, September 22, 2020 on The Island Now’s website:

The federal government’s budget deficit is hitting all-time highs and New York’s 2020-2021 state and local government budget deficits are mushrooming.

And if Joe Biden wins in November, his new spending proposals will exceed $5.4 trillion over ten years.

Where will all the money come from to plug budget gaps and to fund new spending? Tax hikes.

Biden has already proposed raising the top income tax bracket on people earning over four hundred thousand annually to 39.6 percent. The capital gains rate will jump from 23.8 percent to 39.6 percent and corporate taxes will go from 21 percent to 28 percent.

However, if the Democrats win control of the White House and both branches of the Congress, don’t expect the radicals to be satisfied with Biden’s plan. My guess is they will insist that rates for income taxes and capital gains hit at least 45%. As for the corporate tax rate, they will probably push it to 35%, the rate during the Obama years.

In New York, Gov. Cuomo has been lobbying for $59 billion from Washington to close the fiscal gaps for the state, the MTA, and local municipalities.

But even if he gets that money from a Biden administration, it’s only a one-shot revenue. It does not fix the structural deficit caused by Cuomo’s shutdown of the New York economy.

Tens of thousands of small businesses and restaurants that will never reopen and the exodus of the state’s top earners will have long-term effects on tax revenue streams.

While Governor Cuomo understands that increasing taxes will not be enough to cover the projected deficits, his message is failing to register with the Democratic-controlled state Legislature.

Those Democrats are calling for the rate on millionaires, which is presently 8.82%, to be increased to 9.6 percent for those making over $5 million annually, and for those earning over $100 million, 11.85 percent.

The most ridiculous proposal is a tax on unrealized capital gains of equity holdings of billionaires.

If enacted, people would have to pay a tax on a stock that has appreciated in value even though the owner has not sold the investment and taken again.

Here’s how that would work: An investor buys a stock on January 1 for $5 a share, that at year-end is valued at $8 a share. The owner would have to pay a tax on the $3 appreciation.

But, say in March of the next year the investment goes south and the investor sells it for $2 a share. The owner not only takes a 60 percent loss on the investment but is stuck paying an unrealized capital gain tax on April 15 on the losing stock that the investor no longer owns.

Sound crazy? It is.

A tax on unrealized gains, by its very nature, is ludicrous.

As for local governments, an important source of income—sales tax collections—continues to decline. In August, it was off 7.8 percent statewide compared to a year ago, and in July it was down 8.2 percent. In Nassau, sales tax revenues, this year, have been down 10.5 percent.

To fill the 2020 deficit hole, Nassau might be able to issue debt through the Nassau Interim Finance Authority. But that, too, is only a one-shot.

Other municipalities may go to Albany and beg for the authority to issue deficit debt.

That remedy, however, only kicks the fiscal can down the road. It sticks future generations—the children and grandchildren of today’s taxpayers—with the bill for this year’s spending.

Unless elected officials at every level of government agree to do more with less, and address the skyrocketing costs of entitlement and pension programs, every form of taxation will have to be increased.

And considering that over 400 thousand have fled New York this year, raising taxes will only exacerbate the situation.

E.J. McMahon, a senior fellow at the Empire Center for Public Policy agrees. “State lawmakers,” he observed, “now clamoring to jack up state and city tax rates on millionaires insist the targeted taxpayers won’t mind—and won’t respond by simply moving. But the new IRS data add to the body of circumstantial evidence pointing to an increased outflow of high earners from New York even before the pandemic.”

With federal, state and local taxes poised to go up, it should come as no surprise if the most robust corporate sector in New York is the moving van industry.

Needed: Sane Liberal Democrats Like Historian Arthur M. Schlesinger, Jr. – By George J. Marlin

September 22, 2020

This article I wrote appeared on the web site on Tuesday, September 22, 2020.

Many of Cuomo’s job investments have failed – By George J. Marlin

September 11, 2020

The following appeared on Monday, September 7, 2020 on The Island Now’s website:

Since Gov. Andrew Cuomo took office in January 2011, he has invested billions of taxpayers’ dollars into business ventures and so-called job-creating projects.

Regrettably, most of those investments have been flops.

Remember Start-Up NY? Cuomo spent over $50 million on television and radio commercials to promote that program, which grants ten years of no taxes to approved technology companies that locate in zones near state and city university campuses.

The return on the $50 million investment was awful. Between 2013 and 2016 only 408 had been created at a cost of $122,549 per position. (The dismal results may explain why we have not heard much of Start-Up NY in recent years.)

But that’s not the only failed program.

An investigative report released in June 2017 by the Gannett newspaper chain revealed that $13 billion in tax incentives, granted by state and local job programs during Cuomo’s tenure in office, had seriously underperformed and lacked transparency on how that money had been spent.

The report noted, for example, that Cuomo’s Regional Economic Councils had pledged $4.4 billion to 530 projects between 2011 and 2017, but few had job creation targets, and there were potential conflicts of interest.

It gets worse.

In August, the office of State Comptroller Thomas DiNapoli released an oversight audit of select high-technology projects funded by New York’s Empire State Development Corporation to determine if taxpayer money “is effectively spent and is producing the intended results.”

Formerly known as the Urban Development Corporation, EDC is the primary state agency responsible for coordinating, monitoring and funding the billions of dollars of investments in private companies that are expected to create jobs and spur economic growth in financially depressed parts of New York.

The audit, which covered the period Jan. 1, 2013 through April 30, 2019, focused on a number of expensive high-profile projects, including the “Buffalo Billion” initiative.

The auditors concluded:

• Initial project assessments lacked sufficient detail, such as reviews of the financial viability of beneficiary companies and cost-benefit analyses to assess the overall benefits of the projects, to justify the use of state funds.

• There is a lack of consistent and rigorous performance and evaluation standards for measuring whether programs and projects attain their intended goals.

• Public progress reports provide limited and conflicting information on high-tech projects’ progress, making it difficult to determine their current statuses.

And despite the billions expended, the projects have not created the promised number of new jobs.

The largest state investment (I use that term loosely) was $995 million in the four “Buffalo Billion” high-tech projects: the RiverBend Tesla project, the Buffalo IT Hut (IBM), the Medical Innovation and Commercialization Hub, and the Buffalo Institute for Genomics.

The biggest piece of change, $791 million, went to the RiverBend Tesla project, which—surprise, surprise—is not meeting expectations.

EDC’s own benchmark for such projects is $30 in benefits for every $1 spent. As for the RiverBend project, EDC expects the economic benefit per $1.00 spent will be a paltry $0.54.

How pathetic is that?

The audit points out that when the RiverBend project was expanded in 2014, the governor boasted 5,000 jobs would be created.

As those job numbers failed to materialize, however, the state agreements with RiverBend were amended to adjust the employment targets. The amendments reduced “the number of jobs required to be located at the RiverBend facility, as well as making it unclear what and where the remaining jobs will be.”

In other words, Cuomo’s “Buffalo Billion” investment, which he boasted would “create thousands of jobs and spur investments in new investment and economic activity” in Western New York has stalled.

In fact, despite the state’s investment of $995 million, Western New York experienced between 2011 and 2017 a 2.1 percent decline in advanced manufacturing jobs and a 2.6 percent decline in Life Sciences jobs.

How sad is that?

Time and again New York politicians have squandered taxpayer money in dubious corporate investments.

When will Albany pols learn that their job is not to be stock pickers, but to reduce taxes and regulations to attract private investors willing to risk their money to spur job creating economic activity in the Empire State?

The Democratic Party’s Coercive Utopians – By George J. Marlin

September 9, 2020

This article I wrote appeared on the web site on Tuesday, September 8, 2020.