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Blue Civil War
Cuomo Sweats as NY Left Fights Bank Tax Cut

Andrew Cuomo’s new tax plan is rekindling the battle between the liberal and moderate wings of the Democratic Party over Wall Street. The plan would drop corporate income taxes on all sectors to their lowest levels in 50 years, but key pieces of the measure are focused on overhauling taxes on the financial sector. Cuomo has sold the bill as a smart measure to keep businesses in the state, as the NYT reports:

“People move and businesses flee,” the governor said in his State of the State address. “So let’s continue to make our state more competitive.” (Some studies dispute the claim that wealthy individuals flee high-tax states.)

Many liberals and unions, however, are attacking the plan as a sop to rich Wall Street financiers:

“Cutting corporate taxes and cutting taxes for Wall Street banks at a time when there is enormous concern about the high levels of inequality in our society seems inexplicable,” said Bob Master, the Northeast political director for the Communications Workers of America.

We are hearing a lot these days, often from public union leaders, about how high taxes don’t really hurt the states that adopt them. Clearly, New York’s Governor sees things differently, worrying that a combination of high taxes and expensive regulations will drive financial business out of the state. It’s not hard to see what he’s thinking: 16 percent of the income that workers receive in New York state comes from the financial industry. If finance starts shipping off jobs in significant numbers, the Big Apple is toast.

What this story illustrates really vividly is the complicated symbiotic relationship between ultra-liberal politics and Wall Street. The only way New York (city or state) can afford big government and powerful unions is to have a vibrant and large financial sector. But to get elected, NY pols increasingly have to make Wall Street a whipping boy, denounce inequality, and promise to punish and discipline those horrible people making all that money. If Big Blue ever carried out all these threats, the ugly goose that lays all those beautiful golden eggs would just fly away to some other state.

Meanwhile, New York’s stifling mix of high taxes, burdensome regulations, and inefficient government is  undermining the climate for non-financial businesses. Upstate New York has gone from one of the country’s most dynamic regions to a kind of Appalachia North. The state is more and more dependent on Wall Street, and as this dependency grows, so do the stakes in the battle between the Democratic Party’s liberal and moderate wings.

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  • Andrew Allison
    • Kavanna

      Yes. Wall Street is hedging its bets against the left wing of the Democratic party, the wreckers of ACORN (now reborn as “working families”), because it doesn’t know for sure how this game will play out. So they’re moving to NC and FL. The financial is also shrinking as deleveraging continues. Much more shrinkage to come.

      What will the Democrats do?

      • Andrew Allison

        Go down fighting, c.f. Detroit

  • Kavanna

    It’s not just the tax revenue. It’s campaign donations. Obama would not have been elected in 2008 without massive Wall Street support. That presumable buys immunity for various top cronies associated with bailouts and subprime mortgages (Robert Rubin, Jack Lew, Barney Frank, Chris Dodd, the crew at Fannie) — and don’t forget the wreckage-trailing Jon Corzine.

    This is the “new” Democratic party assembled by the Clintons and their allies in the 90s, and, whatever tension there is between them and Obama, the One relies heavily on this network, which overlaps also with the intertwined NY Fed and Wall Street. Here’s the heart of endless asset bubbles, while producing no real recovery.

  • TommyTwo

    I find it puzzling how some on the “left,” who tend to decry jingoism, claim that the dollar can be devalued, the debt ballooned, regulations proliferated, taxes raised, and all without economic consequences, because hey, it’s not as if there is any alternative to the good ol’ US of A!

  • Government Drone

    One interesting problem is that Wall Street is getting to be a political orphan, at least insofar as our major parties are constituted. On the one hand, Wall Street is socially quite liberal (witness its backing of gay marriage); but on the other, quite hostile to business regulation. The first stace makes it not really welcome in the Republican Party these days, & the second alienates it from the more progressive Democrats.
    It seems that a good way out of this conundrum would be for Wall Street & its allies to back or establish a third party more naturally suited to it–Libertarian comes to mind. But even if “Wall Street” is homogenous or organized enough of a lobby to do that, there’s a steep start-up cost & lots of risk in trying to upset our political landscape. I mean, though I tend to skew right on social issues, I might vote Libertarian in an election but only if it seems that the candidate/party has a good shot of winning, & it would be very hard & expensive & not too probable that a Wall Street PAC could successfully get a new party into power.
    This story is just one of many that are complaining about this or that sector of society that no longer feels adequately represented in government; I wonder if it’s just a symptom that our current party establishments no longer really map to society well enough to govern well.

  • free_agent

    It’s rather amusing that the only industry which can survive “New York’s stifling mix of high taxes, burdensome regulations, and inefficient government” is the financial industry. And I suppose the workers in the financial industry are willing to pay all those costs in order to get the location amenities that those factors provide.

  • Boritz

    Andrew Cuomo’s new tax plan is rekindling the battle between the liberal and moderate wings of the Democratic Party over Wall Street.

    What was the reaction of the far Left wing?
    (just kidding 🙂

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