Reductions during Giuliani era contributed to city's economy BHI STAMP to NYC: Drop tax hikes

from NewsLink, Vol. 5, No. 4, Summer 2001 Citing a Manhattan Institute study based on the Beacon Hill Institute's New York City STAMP, Mayor Rudolph Giuliani declared his four-year- old tax cuts a success in creating jobs and restoring the city's competitiveness. “[This] study illustrates an important chapter in the story of our city. Tax reductions have helped more than 80,000 New Yorkers find work in newly created jobs,” declared Giuliani during a press conference on September 5. “Tax reductions have helped even more New Yorkers put food on their dinner tables, take their children to baseball games, and build better lives for themselves and their families.” It has long been an article of faith that the nation's most populous city requires the imposition of above average tax rates. But the Manhattan Institute set out to prove that even in a city that doesn't sleep tax cuts matter. “Our model underscores the important role that tax cuts can and should play in promoting continued growth of the New York City economy in years ahead,” wrote the institute in the study, titled “What New York Has Gained from Tax Cuts.” The Manhattan Institute released the study showing that the tax cuts implemented in New York City over the past four years have created approximately 80,000 private sector jobs. In addition, the institute noted that increasing tax rates, long a first option in New York, would cost the city tens of thousands of jobs. Even with the tax cuts, New York City remains by far the most heavily taxed big city in the country. Nonetheless, the enactment of local tax cuts on a record scale has been one of the cornerstones of New York City's fiscal recovery over the past seven years. A major rationale for these tax cuts, as stressed by Mayor Giuliani and other city officials, was to encourage new growth in New York's economy. While tax cuts are not solely responsible for the city's economic turnaround, says Edmund J. McMahon, a Senior Fellow at the Institute, they are a crucial component that can't be ignored. The study found that about one-fourth of New York's recent job growth—not an insignificant share, can be attributed to the tax cuts. Specifically, the study found that: • The personal income tax, sales tax and property tax reductions enacted by the city in the last four years have generated 80,000 new private sector jobs, or roughly one fourth of the city's total employment growth since 1997. • More than 6,500 new jobs will be generated by tax cuts included in the City's fiscal 2002 budget that are still awaiting the state Legislature's approval. • Nearly 15,000 new jobs could be added to New York's employment base by eliminating the remainder of the income tax surcharge first adopted a decade ago. • Restoration of the 12.5% income tax surcharge, repealed in 1998, would result in the destruction of approximately 25,000 jobs. Restoring both surcharges would cost the City nearly 37,000 jobs. The model developed for the Manhattan Institute by BHI was the first city model in the series of State Tax Analysis Modeling Programs. The model estimates the impact on New York City employment, wages, capital and tax revenues of changes in four broad-based city taxes—the personal income tax, the sales tax, the property tax and the general corporation tax. The NYC-STAMP model estimates the revenue effects of tax changes on a “dynamic” basis, taking into account both the immediate revenue loss and the revenue gained from new employment and economic activity generated by the tax cuts. Thus the model can quantify two crucial and often hotly debated issues—the extent to which tax cuts “pay for themselves,” and the extent to which tax increases fail to raise as much money as expected. ”By developing New York City STAMP,” said executive director David Tuerck, “BHI made it possible for the Manhattan Institute and for Mayor Giuliani to put hard numbers behind the common-sense but hitherto undocumented view that recent tax cuts have contributed substantially to the growth of the City's economy.” What New York Has Gained From Tax Cuts, from the Manhattan Institute's web site (http://www.manhattan-institute.org/html/cr_20.htm)

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