This dynamic has led to a Economic recovery in K shape. Corporate titans, investors and elite professionals continue to be profitable while the vast majority of the workforce are hit by unemployment, food insecurity and even homelessness. In the assembly district I represent, food lines have wrapped around blocks as immigrants and low-income communities struggled to survive.
The origins of economic inequality lie before the pandemic. One of the main causes was the Tax Cuts and Employment Act of 2017, which lowered the federal corporate tax rate from 35% to 21%. Now the US has one of the lowest corporate tax rates among the Organization for Economic Co-operation and Development countries. The TCJA also provided for a 20% tax cut known as the pass-through deduction for limited liability companies and partnerships – which NYU tax expert Daniel Shaviro did described as “the worst provision ever seriously proposed in federal income tax history”. In the years from the passage of the Trump Tax Bill by Congress to the arrival of Covid-19, the bulk of corporate profits went into shareholder payouts, one-time bonuses, and increases in salaries for CEOs. In the meantime, employment growth and wages stagnated.
The solution to this billionaire giveaway is simple: New York must reverse the state-level cuts with a surcharge. The corporate tax portion of the Invest in our New York Act would impose a surcharge so large corporations would pay the same corporate tax rate as in 2017. Opponents of the proposed tax hike, like opponents of all taxes, are sure to claim that such a move would turn business away from the Empire State, but they are not.
First, corporate tax in New York is unusually low given the size and dynamism of our economy, the 10th largest in the world. New Jersey and Pennsylvania tax corporate profits at almost twice the New York tax rate. Second, much like millionaires who rarely migrate for tax reasonsLarge companies face similar limitations. New York offers a labor market rich in skilled workers, advanced (if underfunded) infrastructure, and highly developed commercial networks. Businesses could pay less taxpayers’ money leaving the state, but only at the cost of losing even greater profits, as their economic success depends on the local connections they have built, their customer base, reputation, and community.
Fortunately, New York is wealthy enough to fund a full recovery from the pandemic, but only if we can muster the political courage to levy taxes on the rich and big corporations. With only a few weeks left in the state budget negotiations, New Yorkers face the real prospect of historic cuts in public services and massive job losses. We must get those who have benefited from our work and suffering for years to pay their fair share to fund the recreation we all need. Our working communities deserve not only the ability to survive, but also to live, work and raise their families in dignity.
Jessica González-Rojas represents the 34th Congregation District, which includes Corona, East Elmhurst, Jackson Heights and Woodside in Queens.