The High Cost of Political Correctness

There's an interesting item posted on the Gotham Gazette website that comments on the high cost of living in NYC. There is, however, a glaring omission: there is no mention in the litany of costs of the city's high tax rates. Why this was left out is not clear, but even a casual analysis of the issue should lead the analyst to this hot topic.

For instance, there is a discussion of the high cost of groceries that concludes that there's an obvious connection between grocery prices and real estate: " Clearly there is no conspiracy of American farmers to charge New Yorkers more," said Frank Braconi, chief economist at the city comptroller's office. "If you have food prices going faster, in all likelihood it's going to come back to real estate one way or another ... supermarkets competing for space."

The competition for real estate space, however, is not only about rising rents in Manhattan. It's also the rising rate of commercial real estate taxes-taxes that were raised precipitously by the mayor and the council in 2002. Every commercial lease in the city has a tax pass-along, and the cost of groceries reflects this reality

Some of this can be seen in the relative price superiority of Fairway on 129th Street. Fairway, illegally zoned in this manufacturing area-having been given a pass on the required special permit-has a rent that is lower than just the commercial tax that a Gristedes pays on, let's say, 96th Street. In addition, as we have commented, the high retail prices also reflect the city's harsh regulatory environment.

All of the wonderful consumer protection contained in the myriad of fines that are issued to neighborhood stores, is a cost borne by the very consumers the statutes are devised to supposedly protect. If New York's consumers were presented with a cost/benefit analysis of all this, we think that a great majority of them would elect to eliminate the DCA in exchange for a leaner competitive market.

This discussion of cost pass alongs doesn't include the direct tax burden that is borne by city residents. As the Gothamist reported earlier this year: "A report from the Independent Budget Office showed that New York City has the biggest tax burden than eight other big cities. In fact, NYC's tax burden is practically 50% higher than the average of cities like Philadelphia, Los Angeles, San Antonio, Houston, Chicago, Dallas, Phoenix and San Diego. (We don't know where San Francisco, Boston, or Seattle were during this survey.) For every $100, New York City's state and local taxes "absorbed" $9.02, while other cities average $6.16."

It is this basic reality that under girds-or should-any discussion of water bills, grocery prices, and transit fares; not to mention the proposed congestion tax. To talk about the high cost of living in NYC without mentioning the tax burden is to render the writer incoherent; or at least a member of the Times editorial board.