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.