Keating Critiques Quinn

In yesterday's NY Post Ray Keating analyzed the State of the City speech of Speaker Chris Quinn-the one the reprised James Carville's famous line, "It's the economy stupid."

Keating feels that the speaker really doesn't get the extent to which this city is a lousy place to do business in because of its incredible tax burden: "New York City is a lousy place to start up, run or invest in a small business, but city officials don't seem to have a clue as to what to do about it. Economic growth, innovation and job creation are overwhelmingly about entrepreneurs, along with the investors willing to supply capital to entrepreneurial ventures. According to the US Small Business Administration's Office of Advocacy, small businesses created about two-thirds of net new jobs over the last decade and a half. But Mayor Bloomberg and the City Council have done little to lower the cost of innovating, building businesses -- small or otherwise -- and creating jobs."

Cluelessness seems to be a bigger epidemic in NYC than the touted obesity plague-the one that is spawning, what else, another tax to already overtaxed New Yorkers. And, as we commented in an earlier post last week, while the speaker recognizes the need for a, "new tax environment," she doesn't really understand what that would mean: "This kind of proposal doesn't begin to scratch the surface of what needs to be done to make the city business-friendly. In fact, when it comes to taxes, the city arguably ranks as the most hostile place in the nation for entrepreneurs. They not only face higher costs for rent, power and other basics, but sky-high income-tax rates literally punish the crucial acts of starting up, building and investing in successful businesses, and working for these ventures."

The litany is truly endless: "If an entrepreneur sets up as an unincorporated business -- as a sole proprietorship, partnership or limited-liability company, as most small firms do -- he or she pays a state personal income tax with a top rate of 8.97 percent (one of the highest among the states), not to mention a city-imposed personal income tax with a top rate of 3.648 percent. That's a combined rate of 12.618 percent -- a big bite out of the bottom line. Investors also pay this same high tax rate on capital gains -- a clear disincentive for investment in new or expanding businesses."

Yet, we give Quinn credit for even starting the tax environment conversation-where the mayor was on this is anyone's guess, but will venture Bermuda. Still an even greater honesty is needed-the tax problem is that severe: "Unfortunately, there's more. The city piles on many of these important risk-takers an unincorporated business tax. That's another 4 percent income levy, raising the top rate on these businesses to 16.618 percent. But don't get the impression that incorporating allows business to escape crushing taxes. The state corporate tax, plus the business-tax surcharge that helps fund the MTA, combine for a corporate income-tax rate of 8.307 percent. The city adds an 8.85 percent tax, for a top combined rate of 16.857 percent."

Is your head hurting yet? A radical revamping is needed-and the city, along with the farblongjid Bloomberg needs to be weened from its job killing mindset: "New York once was a city of cutting-edge entrepreneurs, but it hasn't been for decades. It won't become one again until city government provides deep and broad tax relief. Eliminating the unincorporated business tax, the extra taxes on S corporations and capital-gains levies would be an excellent start. Cutting city personal and corporate income-tax rates at least in half would help, too."

But this would mean that the economic guru who's purchased a third term based on his risible expertise in this area, would have to become radicalized against the true culprit for NYC's dire straights-big government: "In the end, city politicians must choose between big government and constrained entrepreneurship or smaller government and an expansive environment for entrepreneurs and the businesses and jobs they create."

When Hell freezes over.