McCAUGHEY: Go bold, Bruce Blakeman, and win New York State

New York State is in an economic death spiral. Companies and taxpayers are fleeing the state, taking their money with them.

Gubernatorial candidate Bruce Blakeman needs to go bold and offer New Yorkers real change.

Roll out a concrete plan to phase out the state income tax. It’s an economy killer. The Albany spendaholics and taxaholics in both parties will claim it can’t be done. But 68% of New Yorkers — regardless of their party affiliation or their age — support zeroing out the income tax, according to a Morning Consult poll done in December 2024.

Forty per cent of Democrats and voters who say they lean Democratic strongly support axing the tax, while only 10% strongly oppose. It’s politically saleable and economically essential.

All governments need tax revenue, but taxing income is far more damaging to the economy than taxing property or sales and most economists agree. State income taxes cause companies to flee to lower-tax or zero-tax states, eroding the tax base and causing brain drain.

In January, the White House Council of Economic Advisers urged states with income taxes to phase them out “through some combination of belt-tightening and finding less damaging forms of tax collection.”

Looking specifically at New York state, the CEA said phasing out the state income tax will do more than save taxpayers the money they otherwise would owe to the government.

The average New York wage-earner would earn as much as $6,757 more pre-tax yearly, and business startups would increase by as much as 29%. Everyone knows someone who has dreamed of starting a business.

Naysayers will warn that the state income tax provides 30% of the money to fund New York state services and contributions to local school districts. They will ask, how are you going to fill that huge hole in the budget? The answer is, there will be no hole. Several states are currently phasing out their income taxes, all using similar legislation.

Here’s how it works: As soon as the state announces it will phase out its income tax, business activity picks up. Companies plan. The legislation puts a hard ceiling on future spending. That’s the “belt-tightening.” There is no budget hole, but spending can’t increase beyond current levels.

The Oklahoma law requires that every time revenue increases 5%, the state has to cut the income tax rate. Legislators have no discretion to create a new government program instead.

In New York, which has a declining population, it’s reasonable to freeze spending at current levels. When the plan to eliminate the income tax is announced and business activity begins to pick up, all the new revenue will be used to slice down the tax rate.

This is a gradual, fiscally responsible way to turn New York from tax hell to the tax haven and economic engine of the Northeast. Think Florida without the palm trees. The plan will take several years, depending on economic growth nationwide. Smart states are getting started. On April 15, South Carolina Gov. Henry McMaster signed a plan into law that will take the state from its current progressive income tax, with a top rate of 6%, down to zero over time.

A South Carolina Policy Council poll done last July found that 73% of voters, including 60% of Democrats, favoured eliminating the state income tax. Nearly three-quarters of South Carolina voters believe ending the income tax will help attract new businesses to the state.

The CEA advises that states can eliminate the income tax faster by adopting a broad-based sales tax on goods and services. In New York, that would mean raising the current 4% state sales tax on goods to an 8.25% sales tax on goods and many services, while exempting groceries and rent to spare the poor.

The math works fine, but these CEA economists aren’t running for office. Blakeman is hardly likely to propose hiking any taxes, nor should he. He needs to put forward a vision for the future of New York as a zero-income tax, high-growth state.

Blakeman is already proposing eliminating the state income tax for the first $50,000 earned by single filers and $100,000 by joint filers, and a 10% tax cut on all income under $250,000. Those are mere baby steps. No company is going to relocate to New York for that.

The competition among states for corporate business has never been keener. A staggering 53% of corporate CEOs say they are “open to examining new locations” based on taxes, energy costs, regulation and workforce availability. The companies evacuating New York are choosing to go to states with no income tax or a plan to phase it out. These states are cleaning New York Gov. Kathy Hochul’s clock.

But New York is not doomed to economic failure. With a bold plan to eliminate the income tax, Blakeman can improve his chances of winning and turning New York around. Go bold, Bruce.

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