The cost of living in New York City is 240 percent of
the national average, according to one recent estimate. That’s not just the highest in
the country. It's nearly twice as high as the next
most expensive metro areas (Boston and Washington,
D.C, in that order).
If you want to keep people in New York, the first
thing you have to do is to reduce the staggeringly
high cost of staying here. The single biggest factor
driving that cost is a crushing state and local tax
We have become so used to hearing about New York
City’s high taxes that we have become sort of numb to
it. But consider these statistical tidbits:
â€˘ New York’s overall tax burden is by far the highest
found in any of America’s largest cities.
â€˘ Despite relatively low residential property taxes,
the overall tax burden on New York City homeowners is
the highest in the state.
â€˘ For households with incomes of $100,000 a year
(middle class by New York standards) the combined
state and local tax burden is 32 percent higher than
the average for major cities.
â€˘ The commercial property tax is absolutely out of
sight, reaching nearly $10 per square foot for prime
space in midtown Manhattan. The only city that comes
close is Chicago. In most other major cities, it is
less than $5. In New Jersey, it is $3.
â€˘ The combined state and city personal income tax rate
this year will reach a maximum of over 12 percent â€“
highest in the nation, almost double the rate in New
Jersey, and more than double
the rate in Connecticut or Pennsylvania.
With the exception of the last item in the list, these
comparative measures do not reflect the impact of the
roughly $2.8 billion in city tax increases that have
been enacted since Mayor Michael Bloomberg took office
last year, or the $3 billion in state tax increases
enacted by Albany this year.
Just because many New Yorkers do not directly pay
these taxes, either because they are renters or
because their incomes are below the median, does not
mean they are unaffected by them. The impact of taxes
is pervasive, rippling through every sector of the
economy. High taxes ultimately drive down the number
of new jobs created in the city and drive up the price
of goods and services produced there.
Tackling this problem will require a constant,
unrelenting effort to steadily bring down the cost of
government at both the state and city levels. This is
why it is so important for Mayor Bloomberg to continue
pressing municipal labor unions for productivity
Beyond taxes, the most important factor driving cost
is the price of housing in the city. This is a classic
supply and demand problem, growing directly out of
rent regulation and restrictive zoning and building
codes. The answer is to stop treating housing as a
socialized good, a government-funded entitlement.
Clear away the dense thicket of regulatory barriers to
building in New York, and let the market do the rest.
Beyond taxes and housing, improving city schools and
doing even more to drive down the crime rate obviously
are both crucially important to retaining residents.
But if its economy is drowning in high costs, the city
will lack the tax base to do those good things in any
E. J. McMahon is a senior fellow for Tax
and Budgetary Studies, at the Center for Civic
Innovation at the Manhattan Institute.
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