Why do New York politicians hate small business?

New York City Mayor Michael R Bloomberg meets with incoming Mayor Bill de Blasio (L) at City Hall after his election victory in New York. Photo: REUTERS

New York Governor Andrew Cuomo appointed a commission to figure out how to make the Empire State more business-friendly and change its reputation for high taxes. The New York state government is now running commercials on national television touting the tax breaks that businesses can get by relocating there. “Small Business Saturday” – the annual post-Thanksgiving event encouraging folks to patronize small businesses — was heavily promoted in nearly every media outlet.
However, there may be no place in the country that treats small businesses worse than New York. Harmful policies come out of both City Hall in Manhattan and the State House in Albany. The commercials, narrated by Robert DeNiro and set to Jay-Z's iconic song, Empire State of Mind, may look cool, but what New York needs to make itself more conducive to investment, job creation and economic growth, is better fiscal policy. Not more glamour.
Though it's great to see Cuomo own up to the fact that New York's tax climate is inhospitable to employers — and events like Small Business Saturday are nice — this doesn't change the fact that New York's political class is uniquely hostile to small business. To the detriment of the entire state economy.
Step one is admitting you have a problem and Cuomo has done this with his commission. He has offered to waive taxes for businesses that set up shop in certain parts of the state, such as Albany. But then he signs bills that harm employers across the state.
If Cuomo, a 2016 presidential prospect, does decide to run, he might have trouble explaining the 2011 tax package he signed — if he makes it to the general election. Cuomo's tax plan, as the Wall Street Journal described it, tossed out “the most desirable part of New York's tax code, which is its relative flatness…The new code will include a 'progressive' ladder: 6.45 percent for couples earning between $40,000 and $150,000, 6.65 percent from $150,000 to $300,000, 6.85 percent from $300,000 to $2 million, and 8.82 percent above $2 million ($1 million for individuals).”
Cuomo portrayed his proposal as a tax hike on “the rich.” That may sound like music to the ears of many New York Democrats. But the unmentioned target of this tax increase was small business.
Cuomo's tax plan hit more than 8,000 New York small businesses with a whopping 27 percent rate increase, according to Internal Revenue Service data. This figure, however, only accounts for sole proprietors. Factoring in S-Corps and partnerships that also pay the individual income tax, more than 10,000 New York small businesses saw their taxes go up under Cuomo's plan.
Employers with tight profit margins can't survive such a big increase in Albany's cut of their business. Those that can saw a significant reduction in their job creating capacity as a result of Cuomo's tax hike.
In addition to his tax policies, Cuomo's continuation of New York's ban on hydraulic fracturing prevents some of the most depressed parts of the state from realising the economic growth and prosperity taking place just across the border in Pennsylvania, where local businesses are benefitting from the Keystone State's exploitation of the resources found in the Marcellus Shale — which also runs under New York.
Small business owners in New York City, where employers face some of the highest tax rates in the world, have it particularly bad. Unfortunately, the election last month of Bill de Blasio as mayor suggests their plight is only going to get worse.
The Big Apple is one of few U.S. cities that levies a personal income tax, and de Blasio ran on a proposal to raise it by 14 percent for those earning more than $500,000. Taking a page from President Barack Obama's playbook, de Blasio portrays his cash grab as a tax hike on rich plutocrats with Scrooge McDuck-like vaults of money in which they can swim around.