When a city’s tax situation is so complex and burdensome that it has to hire a “taxpayer advocate,” that may be a sign of a problem. Such is the scenario in New York City, where Diana Leyden recently took the helm of an office designed to help taxpayers navigate the convoluted system.
New York City Finance Commissioner Jacques Jiha explained the position (which he created) this way: “We want to collect the right amount of tax and not a dollar more or a dollar less . . . . If you are going to have your hand in people’s pockets, do it with a smile.”
Of course, one could easily make the argument that rather than hiring a $175,000-a-year “taxpayer advocate” to guide citizens through a mind-boggling system, the city could attempt to reform the system itself. New York City is one of the few cities in the nation that levies a separate city income tax on top of the state income tax. If you live in the Big Apple AAPL +0.85%, you pay for the privilege. City income tax rates range from 2.907 percent to 3.648 percent – and that’s on top of a state income tax with a top marginal rate of 8.82 percent. It’s little wonder that The Tax Foundation ranks New York as the second-worst state in the nation when it comes to individual income-tax burden.
Even more complex than income tax is the city property tax, which is projected to bring in around $22.3 billion this year. That’s about 40 percent of the total $56.9 billion in city-based tax revenue, and that number is only likely to grow in coming years; Mayor Bill de Blasio didn’t manage to get his “mansion tax” passed this year but has declared that there is “more work to be done.”
Unfortunately, even with the best intentions, New York City’s new taxpayer advocate cannot undo the problems that are endemic not just to the city, but to the entire state. In addition to having the second-highest individual income tax rate in the nation, New York has the fifth-highest property tax and the eleventh-highest sales tax. Plus, in the newest edition of Rich States, Poor States, the American Legislative Exchange Council ranks New York dead-last in economic competitiveness.
New Yorkers should be alarmed by the current state of their state. Gimmicky programs like Governor Andrew Cuomo’s Start-Up NY have failed to generate jobs and growth; as my Wealth of States co-author Rex Sinquefield noted earlier this summer, “Both labor unions and conservative groups are opposed to Start-Up NY New York; the executive director of the progressive Working Families Party said of the program, ‘That’s not economic development; that’s lunacy.’”
One could also argue that is lunacy to slap the a Band-Aid on a serious wound, which is what New York City is doing by hiring a taxpayer advocate rather than taking a hard look at a system that’s constructed to confuse taxpayers and stunt economic growth.