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Archive for the ‘New York’ Category

I’ll be first in line if there’s a contest over who thinks most strongly that politicians are corrupt, or whether they can waste money in creative ways.

But if somebody asserts that politicians are stupid, I’m going to argue on the other side.

This isn’t because I’m a fan of elected officials. Far from it. However, having been a student of public policy for three decades, I have a grudging admiration for their animal cunning. They’ve developed some remarkably clever ways of extracting more and more revenue from taxpayers.

The bureaucrats at the Paris-based Organization for Economic Cooperation and Development are turning an old pact on mutual administrative assistance between governments into something akin to a World Tax Organization that will have the power to penalize nations that don’t impose onerous tax burdens.

Showing amazing capacity for innovation, Pakistan’s tax police hires transgendered people to encourage (presumably homophobic) taxpayers to cough up more money.

The tax police in England have floated a proposal to have all paychecks go directly to the tax authority, which would then decide how much gets forwarded to taxpayers.

And since we’re talking about the United Kingdom, that nation’s despicable political class wants to improve compliance by indoctrinating kids to snitch on their parents.

Speaking of snitches, tax authorities in both the state of New York and the city of Chicago have programs encouraging neighbors to rat our neighbors.

World Bank bureaucrats put together a report card on the tax systems of different nations, and the way to get a high grade is to impose high tax burdens.

Our friends at the Internal Revenue Service have something called the Taxpayer Advocate Service that mostly exists to – get ready for a surprise – push policies to expand the size and power of the IRS.

And who among us isn’t impressed that the German tax authorities have figured out how to levy a prostitute tax using parking meters.

That last example is a good segue into our newest example of great moments in tax enforcement.

The state of New York has won the right to impose a sales tax on lap dances and other…um…services at strip clubs. Here are some excerpts from the Daily News.

The jiggling and gyrating strippers at Larry Flynt’s Hustler Club are selling sexual fantasy — not demonstrating their dance skills — in the private rooms at the Hell’s Kitchen skin palace, an administrative law judge ruled. “The dancing portion of the service is merely ancillary to the performer removing her clothes or creating the sexual fantasy,” Judge Donna Gardiner wrote in a decision released Monday that means the raunchy moves are subject to the state sales tax. …Gardiner said the Hell’s Kitchen jiggle joint will have to pay $2.1 million in sales tax on the $23.8 million worth of scrip, or the club’s in-house currency, that it sold between June 1, 2006 and November 2008.

And don’t think the government didn’t investigate this issue closely before rendering a decision.

After listening to strippers’ testimony and watching the club’s videotapes, Gardiner ruled that some of the strippers’ routines involve dance, choreography and music, but overall, these are not artistic performances.

I wonder if they also read copies of Hustler magazine? This might be a case where government officials went above and beyond the call of duty to study a topic.

Larry Flynt’s Hustler Club owes $2.1 million in taxes for lap dances performed at the Hell’s Kitchen jiggle joint.Regardless, the strip club didn’t prevail. I guess art, like beauty, is in the eye of the beholder.

I suppose this is the point where I should make some more jokes, but I’m enough of a tax dork that instead I’m going to make a serious point.

The problem in New York is not that the Hustler Club is now being taxed. The problem is that there’s an exemption from the sales tax for “artistic performances.”

Don’t get me wrong. I would prefer that there not be an income tax or sales tax in New York. But if the state is going to impose a sales tax, then all consumption should be treated equally.

This is also my view on the flat tax. I would prefer no income tax, and America did quite well with that approach until 1913. But if there is going to be an income tax, then you minimize corruption and economic damage by having the levy apply equally and neutrally.

At least one Judge in New York seems to have the right perspective on this issue. Here’s another blurb from the Daily News report.

One judge, Robert Smith, criticized the majority, arguing that it was making a distinction based on their preferences. …“Perhaps, for similar reasons I do not read Hustler magazine; I would rather read the New Yorker,” he wrote. “I would be appalled, however, if the state were to exact from Hustler a tax that the New Yorker did not have to pay, on the ground that what appears in Hustler is insufficiently ‘cultural and artistic.’”

Needless to say, I doubt politicians pay much attention to these philosophical and economic arguments for genuine fairness in the tax code.

They simply want more money. And even though I wish they were stupid and incompetent in this regard, they have great talents when it comes time to take our money.

But there is one easy way to avoid heavy taxation. Just drop out of the labor force and live off the government. Millions of your neighbors already have taken this route.

It’s not good for the nation, but it sure is the logical response to perverse government policies that make it less and less attractive to pull that wagon and more and more comfortable to ride in the wagon.

As Henry Payne sarcastically noted, it’s time to party like the Greeks!

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I recently speculated whether Detroit’s fiscal problems should be a warning sign for the crowd in Washington.

The answer, of course, is yes, though it’s not a perfect analogy. The federal government is in deep trouble because of unsustainable entitlement programs while Detroit got in trouble because of a combination of too much compensation for bureaucrats and too many taxpayers escaping the city.

A better analogy might be to compare Detroit to other local governments. Some large cities in California already have declared bankruptcy, for instance, and you can find the same pattern of overcompensated bureaucrats and escaping taxpayers.

And the same thing may happen to New York City if the next Mayor is successful in pushing for more class-warfare tax policy. Here are some excerpts from an excellent New York Post column by Nicole Gelinas.

Mayoral candidate Bill de Blasio…thinks New York can hike taxes on the rich and not suffer… De Blasio’s scheme is this: Hike income taxes by 13.8 percent on New Yorkers making above half a million dollars annually. …After five years, de Blasio would let this tax surcharge lapse, and — he says — find another way to pay.

But there’s a big problem with de Blasio’s plan. Rich people are not fatted calves meekly awaiting slaughter.

In 2009, the top 1 percent of taxpayers (the 34,598 households making above $493,439 annually) paid 43.2 percent of city income taxes (they made 33.9 percent of income), according to the city’s Independent Budget Office. Each of these families paid an average $75,477. No, most people won’t up and leave (though if 20 percent did, they’d leave New York with less money than before the tax hike). But they can rearrange their incomes. Unlike most of us, folks making, say, $10 million have considerable control over how and when they get paid. That’s because much of their money comes from cashing out a partnership, or selling stock or a house or a painting. To avoid a tax hike, it’s easy enough for them to pay themselves earlier by selling their stuff earlier — before the tax hike. The city made $800 million in extra taxes last year because rich people sold their stuff before President Obama increased investment taxes in December. Or, people can pay themselves later — after the five years’ worth of higher taxes are up.

Gelinas makes some very important points. She warns that the city would have less money if just 20 percent of rich people escaped. She doesn’t think that will happen, but she does explain that rich people can stay but take some simple steps to reduce their taxable income.

This is because rich people are different from the rest of us. As I’ve previously explained with IRS data, they get the vast majority of their income from business and investment sources rather than from wages and salaries.

This means, as Gelinas notes, they have considerable control over the timing, level, and composition of their income.

So if Mr. de Blasio wins and succeeds in pushing through his tax agenda, don’t expect to see much – if any – additional revenue. This will be a tailor-made example of the Laffer Curve in action.

In this video on class warfare taxation, I explain that the Laffer Curve is one of five reasons why soak-the-rich taxes are misguided.

I’ll close by addressing a common argument from folks on the left. They assert that places such as New York City (or states such as California) can impose higher taxes because they provide more in exchange.

I sort of agree, though not with the notion that people are getting “more in exchange” from the politicians in New York City and California.

Instead, it’s clear that some people are willing to pay more because they like the non-political features of NYC and the Golden State. For those who like museums, fancy dining, and Broadway shows, there’s no easy substitute for New York City. And for people who like the ocean and a Mediterranean climate, it’s hard to compete with California.

But there are limits. Last month, I shared a very powerful map from the Tax Foundation showing there’s been a huge shift of taxable income out of New York and California between 2000 and 2010.

Governor Jerry Brown recently succeeded in pushing through a huge tax hike in California, so I expect even more people will leave that state, regardless of the climate.

And if Mr. de Blasio is elected and imposes a big tax hike in New York City, I suspect some rich people will decide enough is enough.

No, they won’t move to Connecticut or New Jersey, both of which have become high-tax nightmares in recent decades. But there are a good handful of zero-income tax states, and the rich folks in New York City will figure out that there are also good restaurants in places such as West Palm Beach, Florida, and Austin, Texas.

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Why do words like “snitch” and “narc” have distasteful connotations?

And why don’t we hold “tattle tales” and “stool pigeons” in high regard?

Is it because we think people should be able to do bad things and get away with it? Do we like misbehavior to go unpunished?

I think the answer to these last two questions is an emphatic NO. Close to 100 percent of people would want the authorities to know if any of us overheard a terrorist plot. Or somehow found out about a murder. Or knew about some dirtbag who had raped someone.

SnitchYet we still don’t like “narcs” and “stool pigeons,” probably because we know that some rules are bad, misguided, or foolish. For all intents and purposes, most Americans have libertarian sensibilities about victimless crimes.

So while we approve of “tattle tales” if it means we catch genuine criminals who violate the rights of others, we look down on the “snitch” who rats out the guy smoking a joint, the jerk who informs the IRS on a small business owner hiding income, and the weasel who tells the local planning gestapo that someone is remodeling their basement without government approval.

I’ve previously shared nauseating stories about Soviet-style tax informant programs in both Chicago and the United Kingdom (where they’re actually encouraging kids to turn in their parents!).

The state of New York is engaging in the same reprehensible tactics, only this time the target is guns rather than money.

Here are some of the nauseating details from a story in the Daily Caller.

For more than a year, New York state has maintained a tip line allowing people to report illegal gun owners and collect a $500 reward. …A February 2012 press release from Gov. Andrew M. Cuomo’s office first publicly announced the tip line, saying it was designed to “encourage citizens to report illegal firearm possession.” …On the Facebook page for The Record’s story, several users criticized the tip line for apparently encouraging New Yorkers to spy on each other.

Of course, sometimes the government actually requires us to spy on each other, as is the case with money laundering laws that criminalize innocent behaviors in a costly, intrusive, and ineffective effort to reduce crime.

Not surprisingly, the government is defending this campaign to turn people into stool pigeons for illegitimate reasons.

…a spokesperson for the New York State Division of Criminal Justice Services defended the program. “This program has been in place for more than a year and is aimed only at getting illegal crime guns off the streets: a goal that every New Yorker can agree with,” wrote Janine Kava, director of public information at NYS DCJS.

What the government should be doing, needless to say, it getting people who do bad things off the street. And that means investigating, arresting, prosecuting, and punishing those who abridge the rights of other people.

It does not mean arbitrarily criminalizing inanimate objects such as guns.

And as this young lady says, the government should only get the guns of law-abiding people under very particular circumstances.

P.S. Andrew Cuomo also happens to be a former Secretary of Housing and Urban Development, where he infamously was in charge of imposing so-called affordable lending requirements that helped start the bad Fannie Mae/Freddie Mac policies that eventually led to the housing bubble and financial crisis.

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I’m periodically dumbfounded by the bizarre actions of government.

Indeed, I even put together a post comparing amazingly stupid policies in the United States and United Kingdom. And I later updated that post with new details of brainless bureaucracy.

Top U.K. entries included an effort to stop children from watching Olympic shooting events and (what must be) the most pointless sign in the history of the world, while leading American entries included preventing a girl from boarding a plane because her purse had an image of a gun and a local school calling the police because a little girl kissed a little boy in gym class.

But I don’t mean to just pick on the anglo-sphere. I’ve also noted the idiocy of the Greek government, which thinks it’s appropriate to subsidize pedophiles and collect stool samples as a condition of getting a business license to set up an online company.. And let’s not forget Italy’s new government of technocratic experts, which managed to appoint the wrong person to be Junior Agricultural Minister.

Saving NYC from the scourge of toy guns

But don’t overlook New York City, which really is in a special category.  And what are the “leaders” of the city that never sleeps doing to demonstrate their blundering incompetence? Well, read it and weep, courtesy of the New York Post.

The owner of a discount store in Brooklyn says the city is holding him up for $30,000 in fines he can’t afford — all because he stocked six toy sheriff sets that included plastic guns. And now the .44-caliber fines for the orange-tipped, obvious fakes are forcing him to close for good.

Isn’t this wonderful? These reckless politicians and bureaucrats will bankrupt an entrepreneur and destroy jobs, while achieving no legitimate public policy purpose.

But don’t be surprised. This is the same crowd that does things such as help prisoners sign up for food stamps, ban bake sales for spreading unhealthy food, and fine you $2,000 for idling your car for more than three minutes.

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I’ve had dozens of posts about overpaid bureaucrats. Indeed, I’ve largely stopped blogging about the topic because it is so depressing to constantly be reminded about how a privileged class of people is manipulating the system to coercively obtain undeserved compensation from their less-fortunate neighbors.

But every so often I see a story which cries out for attention. Bloomberg has a report about a double-dipping bureaucrat who has managed to snag a position providing more than $200K per year while simultaneously ripping off taxpayers for a pension of more than $300K per year.

In a perverse way, I admire Mr. Hunderfund. I never would have thought a bureaucrat could figure out how to scam taxpayers for more than half a million dollars in one year. And for a job that probably shouldn’t even exist.

James Hunderfund, who earns at least $225,000 a year as a school superintendent on Long Island, is also entitled to a $316,245 annual pension from a previous administrative post, according to a compilation of pension data by the Empire Center for New York State Policy. Hunderfund retired in 2006 as superintendent of the Commack school district, also on Long Island. His current contract with Malverne stipulates that he receive an annual salary of no less than $225,000 through June 30, according to Empire’s report, which used a database from the New York State Teachers Retirement System.

The story also notes that there are more than 1,000 other edu-crats who are getting six-figure retirement packages.

The only other issue to address is whether we should be more upset by Mr. Hunderfund’s bloated salary of his obscene pension.

I think the pension is more outrageous, but I’m open to other opinions. Any thoughts?

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I ran across two interesting lists showing how politicians at the state and local level are often just as bad as the ones in Washington, DC. First, Forbes has an article identifying the 10 states with the highest income tax rates. The top rate is a big deterrent to entrepreneurs and investors, but it’s also important to look at the income level where the top tax rate takes effect. Yes, Hawaii, Oregon, and California have terrible tax policy, but Iowa, Maine, and Washington, DC, deserve special scorn for raping the middle class.

Hawaii:                       11% (income over $400,000 (couple), $200,000 (single))
Oregon:                      11% (income over $500,000 (couple), $250,000 (single))
California:                   10.55% (income over $1 million)
Rhode Island:             9.9% (income over $373,650)
Iowa:                          8.98% (income over $64,261)
New Jersey                 8.97% (income over $500,000)
New York:                   8.97% (income over $500,000)
Vermont:                     8.95% (income over $373,650)
Maine:                        8.5% (income over $39,549 (couple), $19,749 (single))
Washington, D.C.:      8.5% (income over $40,000)

Looking at the other major source of revenue for state and local governments, the Tax Foundation identifies the cities with the highest total sales tax rate - a number that often includes three separate levies by state, county, and city governments. Here are the top 10. Or should I say worst 10?

Birmingham AL              10.000%
Montgomery AL             10.000%
Long Beach CA                9.750%
Los Angeles CA               9.750%
Oakland CA                    9.750%
Fremont CA                     9.750%
Chicago IL                     9.750%
Glendale AZ                    9.600%
Seattle WA                     9.500%
San Francisco CA           9.500%

One thing that stands out is that California is on both lists, which helps explain why the state is such a basket case. Seattle deserves a special mention because at least there is no state income tax in Washington.

Last but not least, it’s worth mentioning that there’s no sales tax or income tax in New Hampshire. Live Free or Die!

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The Wall Street Journal opines about the latest bone-headed move by New York politicians to drive away productive activity. Connecticut is not exactly a low-tax jurisdiction, but sometimes being less worse is all that’s necessary to win a tax competition battle.
Connecticut Governor Jodi Rell, a Republican who usually doesn’t mind higher taxes…has nonetheless declared a tax-competition border war amid the New York Assembly’s bid “to vastly increase the tax liability of hedge fund professionals who work in New York.” That’s how Mrs. Rell put it in a letter last week to the New York Hedge Fund Roundtable, imploring its members to relocate to her state and offering to do “anything possible to assist you,” including the aid of state “relocation specialists.” …Arguably the hallmark of bad decision-making is whatever they cook up in Albany—which is planning to tax the carried interest income of New York-based hedge fund managers who live out of state at the top ordinary tax rate of 8.97%. …the New York Assembly…thinks it can raise $50 million by targeting bridge-and-tunnel commuters to Manhattan too. It never will, given the mobility of capital. New York City Mayor Michael Bloomberg—who knows the combined city-state top tax rate approaches 13%—told the New York Observer that “I think it’s the best thing that ever happened to Connecticut. I can’t imagine why every hedge fund wouldn’t pick up tomorrow and move.” …Last September—after years of tax-hike plans that fell through—Mrs. Rell and the Democratic legislature raised the top income tax rate to 6.5% from 5% on filers making more than $500,000. The state’s combined state-local tax burden of 11.1% is the third highest in the nation, according to the Tax Foundation, after New York (No. 2) and New Jersey (No. 1). Those sins duly noted, Mrs. Rell is nonetheless right in this case, and you can expect a further migration to the Nutmeg State from the economic nut house that is New York.

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The competition to be the Greece of America has a lot of contestants. California and Illinois certainly are strong candidates. New Jersey was an early favorite, though Gov. Christie is actually doing some good things and pulling the state back from the precipice. But let’s not forget New York. Here’s an excerpt from a Wall Street Journal column about how bureaucrats are gaming this system to get absurd salaries:

Will there be a run on New York’s debt, much like we saw in Greece this spring, causing interest rates to soar in Athens? With a $135 billion budget, New York State faces a shortfall of around $9 billion, which might be manageable if politicians had the courage to go “where the money is,” says E.J. McMahon, a state budget expert at the Manhattan Institute. “The big problem,” he adds, “is that no one will take on the unions and especially their gigantic pensions.” A new Manhattan Institute report shows that it’s been business-as-usual in the state’s dealings with Big Labor, despite the fiscal crisis. Last year, 74,000 workers at the Metropolitan Transit Authority got a 2.4% raise even as their agency was teetering on bankruptcy. Some 8,000 MTA employees now earn $100,000 or more in annual salary, and 44 earn more than $200,000 a year, putting them in the top 3% of income in America. The latest plan, Mr. McMahon says, is for Gov. Paterson and the Democrats in the legislature to “cap rising pension bills by ‘amortizing’ them, which essentially means borrowing $2.5 billion from the pension fund in the next four years alone. Of course, this won’t reduce costs — it will merely push them into the future.”

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In town for a speech tomorrow morning (will also be on Fox and Friends at 8:15). Saw this on my walk to the hotel.

Is the city government really this greedy? Or is there something so horrible about idling that it requires outlandish fines?

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I have a column in the New York Post this morning explaining that big government is a losing deal for taxpayers in the Empire State. I’m tempted to say they deserve to be over-taxed and over-regulated because they keep electing collectivists like Chuck Schumer, but I grew up in the area and still follow the Yankees, so I hope the people of New York wake up and begin fighting big government. Here’s an excerpt:

Federal spending has approximately doubled during the Bush-Obama years — great news for special-interest groups, but bad news for New Yorkers, who pay a disproportionate share of federal taxes because of higher-than-average incomes. Needless to say, the IRS code allows no compensation for New Yorkers’ higher-than-average living expenses. New Yorkers also lose on the spending side of the ledger. According to the Tax Foundation, the state gets back only about 80 cents for every $1 it sends to Washington. But the harm is actually greater — because Washington takes that dollar from the job-creating private sector and returns the 80 cents in the form of handouts, subsidies and pork of very dubious economic benefit. And things are going to get worse before they get better. President Obama wants higher tax rates on income, higher tax rates on capital gains and increased double taxation of dividends. That will tilt the overall tax burden even further against New York. The taxes on investment, in particular, will hurt Wall Street — on which the city’s economy depends.

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Politicians understand the economic impact of taxation when it serves their interests. They often brag about raising tobacco taxes to discourage smoking. It’s not their business to dictate private behavior, of course, but they are right about higher taxes leading to less smoking (they also lead to more cigarette smuggling, but that’s a separate issue). Those same politicians, however, conveniently forget about the economic effect of taxes when they impose high tax rates on work, saving, investment, and entrepreneurship. Or maybe they simply don’t care. But as is explained in the Wall Street Journal, taxes on productive behavior matter a lot. More than one million people have escaped New York this decade, and punitive taxes clearly have played a role in this brain drain to other states:

Between 2000 and 2008, the Empire State had a net domestic outflow of more than 1.5 million, the biggest exodus of any state, with most hailing from New York City. The departures also have perilous budget consequences, since they tend to include residents who are better off than those arriving. Statewide, departing families have income levels 13% higher than those moving in, while in New York County (home of Manhattan) the differential was even more severe. Those moving elsewhere had an average income of $93,264, some 28% higher than the $72,726 earned by those coming in. In 2006 alone, that swap meant the state lost $4.3 billion in taxpayer income. Add that up from 2001 through 2008, and it translates into annual net income losses somewhere near $30 billion. …no single reason can be fingered for a million migrants seeking their fortunes across state lines, but one place to start is New York’s notorious state and local tax burden. According to the Tax Foundation, between 1977 and 2008, New York has ranked first or second in the country for its state-local tax burden compared to the U.S. average. In the years considered by the Empire Center study, New York’s state and local tax burden ranged between 11% and 12% of income. The peak year for taxes, 2004, was followed by the peak year for departures—as New York lost nearly 250,000 people to other states in 2005. And that’s before another big tax hike this year. That pattern is consistent with the annual migration patterns, showing that highly taxed and economically lackluster states were most likely to end up in residents’ rear view mirrors. According to the annual study by United Van Lines, states like New York, New Jersey, Michigan and Illinois have been big losers in recent years. …Liberals continue to insist that they can raise taxes ever higher without any effect on behavior, but the New York study is one more piece of evidence that this is a destructive illusion.

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