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Nixon Doesn’t Believe High Taxes Will Drive Corporations, Rich People out of New York

• August 30, 2018 12:23 pm

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New York gubernatorial candidate Cynthia Nixon (D.) on Thursday suggested that increasing taxes on New York's wealthiest residents and corporations will not push them out of the state.

Nixon appeared on MSNBC's "Morning Joe" to reflect on her debate with New York Gov. Andrew Cuomo (D.), which aired Wednesday night. The former "Sex and the City" actress highlighted the contrast between her and Cuomo and talked about her plans to impose higher taxes on corporations and wealthy New Yorkers.

MSNBC analyst Rick Tyler asked Nixon about her proposal to impose higher taxes on millionaires and billionaires, specifically her proposal to increase the corporate tax rate.

"If you were successful in imposing a millionaire's tax or corporate tax, what makes you think those companies and those wealthy people would stay in New York?"

She responded by saying that if high taxes were the factor to make wealthy people move, then there wouldn't be so many wealthy people currently in New York or California. She then pivoted to talk about some of the factors that make a state a "business-friendly environment."

"One of the main things that businesses care about is having an educated workforce, and in order to do that, we really need to invest in education. The other thing that businesses really care about is infrastructure, and we've so divested not only from our New York City subway, but from our roads and our transportation in general," Nixon said.

"If we want to create jobs for New Yorkers, investing in infrastructure is the most effective way to do it, and it's a way to prepare our state for the future and make it more business friendly," she concluded.

While there are many wealthy people still living in New York and California despite high taxes, many have also fled to lower-tax states like Texas, Florida, and Arizona.

Arthur Laffer, who served as a key economic adviser to former President Ronald Reagan, and Stephen Moore, a former adviser to President Donald Trump, said both California and New York will lose a net 800,000 residents over the next three years because of high taxes. That is roughly twice the number that left from 2014 to 2016

In a Wall Street Journal op-ed, they described the impacts of tax changes signed by Trump, which will limit the deduction of state and local taxes to $10,000. The limited deduction means high-earning taxpayers in high-tax states will face tax increases under the new federal tax code.

For years blue states have exported a third or more of their tax burden to residents of other states. In places like California, where the top income-tax rate exceeds 13%, that tax could be deducted on a federal return. Now that deduction for state and local taxes will be capped at $10,000 per family.

Consider what this means if you’re a high-income earner in Silicon Valley or Hollywood. The top tax rate that you actually pay just jumped from about 8.5% to 13%. Similar figures hold if you live in Manhattan, once New York City’s income tax is factored in. If you earn $10 million or more, your taxes might increase a whopping 50%.

About 90% of taxpayers are unaffected by the change. But high earners in places with hefty income taxes—not just California and New York, but also Minnesota and New Jersey—will bear more of the true cost of their state government. Also in big trouble are Connecticut and Illinois, where the overall state and local tax burden (especially property taxes) is so onerous that high-income residents will feel the burn now that they can’t deduct these costs on their federal returns. On the other side are nine states—including Florida, Nevada, Texas and Washington—that impose no tax at all on earned income.

"In years to come, millions of people, thousands of businesses and tens of billions of dollars of net income will flee high-tax blue states for low-tax red states," they said. In addition to the thousands expected to leave New York and California–the county's fourth and first most populous states respectively–Connecticut, New Jersey and Minnesota will lose a combined 500,000 people over the same three-year period.