Dear Gov. Hochul:
Under the best of circumstances, the chief executive of any body politic is faced with the challenging task of producing almost immediate results for their constituents.
Unfortunately, it is your lot to lead New York in less-than-ideal circumstances. You did not seek out this responsibility, but now it is yours.
Many of the complex issues confronting you have arisen from the latest chapter of a conflict that has challenged humanity for eons: the competition for a piece of the proverbial pie.
Elected officials and the news media have irresponsibly identified the protagonists in this contest in grossly oversimplified terms – the “rich” and everyone else – which incorrectly implies we are engaged in a zero-sum game.
This concept, when adopted by government as a basis for formulating socioeconomic policy and enacting legislation, manifests itself in the form of increased taxes for the “rich,” lower taxes for some others, and costly, but ineffective, social-welfare programs.
The result is not a zero sum; rather, it is a net loss to the economy and to society.
But who are the “rich,” anyway? Does it suffice to say, “anyone who has more than I do”? It may if one recognizes we are not dealing with two disconnected points but, rather, with a fluid continuum along which talented and hard-working individuals are free to move.
During the period of economic growth following the Great Recession, the phrase “the one percent” entered our lexicon.
The president recently sought to ease this definitional challenge by identifying anyone making over $400,000 a year as “rich enough” to pay more taxes.
It appears Congress is ready to follow the president’s lead and has begun drafting legislation to double the long-term capital gains rate, eliminate the basis step-up for property transferred at death, treat death itself as a taxable sale of property, increase the domestic corporate tax rate beyond the rates paid by foreign businesses, eliminate the tax-deferred like-kind exchange of real property, and other measures.
When added to New York’s recently enacted tax hikes targeting the “rich” – including higher corporate and personal tax rates – the increased federal tax burden will convert the state from an always-challenging to a downright hostile tax environment, especially in New York City with its onerous corporate, individual, sales, commercial rent, unincorporated business, and real property transfer taxes, to name a few.
How long will the owners of closely held New York businesses – job creators and wealth redistributors in their own right – tolerate the combined federal, state and city tax burden when they already pay a disproportionately large share of such taxes?
What if matters became worse?
Imagine if Albany’s veto-proof legislature, emboldened by the departure of your predecessor, decides to revisit some of the tax proposals that were negotiated out of the 2021-2022 budget, such as increasing the estate tax rate, imposing an additional tax on capital gains, introducing a mark-to-market tax on capital assets, reintroducing the gift tax, and more?
Can these proposals, and even the already enacted tax hikes, be justified in the face of recent disclosures that the state did not experience a large, pandemic-related revenue shortfall, the federal emergency grants to Albany remain largely unspent, and nearly half of American households paid no federal income tax during the five years preceding the pandemic?
I urge you to resist turning us into the People’s Republic of New York. Fight to reverse recent tax hikes and to prevent further tax increases. Stop driving closely held businesses and their owners to other jurisdictions.
Finally, consider decoupling from any upcoming federal tax changes that may adversely impact New York businesses and their owners.
Louis Vlahos is a partner at Rivkin Radler LLP. The opinions expressed herein are solely those of the author and do not necessarily represent the views of Rivkin Radler LLP.
This content was originally published here.