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The Tax Dodge
by George Sax
Golisano avoids income taxes, and the Buffalo News ignores some salient facts
The late, renowned novelist and literary journalist Norman Mailer once observed that when many newspapers get a hold of a story, the facts get lost, “even to the protagonists.” Lately, the Buffalo News has been on a crusading tear that sometimes comes uncomfortably close to achieving that result. The paper’s editors, reporters, and others sharing its pages have been trumpeting the argument that New York State’s taxes and governmental profligacy have been strangling businesses and oppressing most New Yorkers.
It’s a slam-dunk, no-brainer to the News editors, and they’ve been pounding on this theme with impressive regularity and apparent passion. Over just the last nine days, the News has devoted considerable space to two editorials, a Donn Esmonde column, two news stories, and a guest column by Sabres owner Tom Golisano, all decrying New York’s supposed astronomical budgets and tax levies.
The latest series of articles is the most recent effort in a campaign that began long ago, and picked up momentum during the current fiscal and economic crises in New York and across the country. It seems bound to have an effect on the thinking of News readers and their acquaintances, but it really raises questions about the ideological tilt of the News’ editing and reporting. The campaign has begun to resemble a sort of genteel agitprop, an attempt to muscle the issues rather than illuminate them.
When Golisano, the immensely wealthy chairman of Paychex, Inc., recently announced he was decamping to Florida to escape New York’s new, three-year tax rise on the most affluent, the News’ evangelistic editors must have smelled blood. They doubled down, producing five members of a local small-business-owning family, the Bells, who are joining Golisano in the Sunshine State because, in Esmonde’s melodramatically poignant words, “Either they shut down and ship out to growth-friendly Florida, or they risk losing everything they have built the past 49 years.”
Why don’t we take the advice of one of New York’s most famous chief executives, Al Smith, and look at the record. In the the News’ front-page article by the usually level-headed Tom Precious, the surprisingly candid Bells concede that they only considered moving to states with no income taxes—of which there are seven—not lower rates. This rather undermines the News’ dire cautions, and a further look at the matter should increase skepticism. The Bells claimed that they pay personal income taxes on their business profits because their 21-employee firm is a limited-liability concern, not an incorporated entity, and their new tax exposure jeopardizes the business’s existence. “So there will be less to invest in the business,” Aaron Bell told Precious. He admitted that two family members earned something in excess of $500,000 last year, and three others something between $200,000 and $500,000.
Why any of this should severely crimp the business is left unclear. Precious’ article seems to conflate personal and business finance. Greg Urban, a certified public accountant at Amherst’s Dopkins and Co., noted, in an Artvoice interview, that, generally, increased business investment would decrease taxable income for such a firm. (He made no comment on the Bells’ specific situation.)
The family also complained about the prospective revocation of their tax benefits under New York’s Empire Zone program. Under newly enacted regulations, a firm must deliver no less than one dollar in investment and job creation for every dollar of financial incentives. The Bells come off as wanting no-strings assistance, and the News tacit endorsement of this posture—early this year, it editorialized against imposing this discipline on program enrollees—puts the paper in the awkward position of supporting expensive giveaways.
Golisano’s News column last Sunday complained vigorously about his increased tax liability and warned that the top one percent of state earners “can, and will, leave.” Maybe, but recent history doesn’t substantiate that threat. When New York enacted a temporary tax hike on this economic class in 2003, the number of these filers increased during the next three years. New Jersey experienced the same phenomenon several years ago.
But Golisano’s indignant and sour farewell really, if inadvertently, highlights the plight of creatures less exalted than he—that is, most of us. The wealthy, and that seems to include the Bells, can shop around for domestic tax havens in a world that enhances the advantages they already wield. Most people can’t and probably wouldn’t choose to move to a state with a high unemployment rate—10 percent in the Tampa area, and up to 15 percent in its outlying suburbs, for example—and a backlog of 600,000 unsold houses due to the real estate implosion.
Of more fundamental importance, Florida’s spurning of income tax revenue produces a reliance on sales and property taxes. On a per capita basis, 75 percent of Florida’s tax collections come from the sales tax levy; in New York it’s about 35 percent. The tax burden in Florida falls heavily and most regressively on those of modest resources, but it’s a system that aggrandizes the minority to which the Bells and Golisano belong.
The News, and various of its conservative allies, may rail against New York’s high taxes—and they are undeniably high—and expensive government, but they’ve all been rather quiet about Attorney General Andrew Cuomo’s effort to make it easier for voters to combine New York’s myriad local jurisdictions and authorities. As Buffalo State College economics professor Ted Ganley noted in an interview, New York tries to maintain more of the social safety net than a state like Florida, particularly when the federal government cuts back.
Instead of undertaking a careful and honest examination of these and other related questions, the News, Golisano, and other disgruntled economic grandees game the discussion, and encourage emotional responses in difficult times.
—george saxblog comments powered by Disqus
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