Crains New York - February 11, 2013 - (Page 11)

CAROL KELLERMANN NY’s people strengths need constant work T he late Ed Koch proclaimed New York City the “capital of the world,” and many New Yorkers would agree with him.But we have competition— not just from international financial capitals London, Hong Kong and Singapore, but also from U.S. regions like the Capital Beltway and Silicon Valley. These places are attracting highly educated workers at a greater rate than the New York metropolitan area, according to a Citizens Budget Commission analysis. Human capital is a hot topic. Thriving in the information economy requires a highly skilled workforce with specialized expertise and an ability to innovate. Attracting such a workforce is essential to New York’s ability to retain strength in core industries and cultivate emerging ones. We compared the attractiveness of our metro area with that of the 14 other largest areas in the U.S. The resulting “competitiveness scorecard,” available at www.cbcny.org, benchmarks performance in demographics, human-capital development and quality of life. The New York metro area ranks in the top tier on many indicators. It has about twice the number of people with master’s degrees as the second- largest city, Los Angeles, and is very competitive in attracting and retaining highly skilled individuals. The area’s strength comes from reputable higher-education institutions, robust employment opportunities and competitive pay in key industries. Its reputation as the nation’s safest big city, its world-class cultural institutions and its ample recreational opportunities are also advantages. But Washington, D.C., and Silicon Valley (including the San Francisco and San Jose areas) are challenging us on important measures. Both surpassed New York in net immigration of highly educated individuals between 2009 and 2011. Washington and Silicon Valley also have the greatest share of their private employment in professional A taxing question: Are rates too high? B eing a millionaire in California became a lot more expensive this year with the “fiscal cliff ” deal that raised federal taxes on the wealthy and the imposition of a state income-tax surcharge that hiked the highest rate to 13.3%. In all, California millionaires face a marginal tax rate of 51.9%, the highest in the nation. The New York Times wondered last week if millionaires would be decamping for greener pastures, especially the eight states with no income tax. At the bottom of the Times story was an important fact for New York City.The federal increases mean the top marginal tax rate for city millionaires is virtually the same as California’s, at 51.7%. Some of the Democratic candidates for mayor want to raise it so that New York City can again boast the highest tax rate in the land. They think this is a good idea. The accompanying chart, taken from a study of state tax rates by Gerald Prante at Lynchburg College in Virginia,shows the competitive position of New York City, the rest of the state and the other high-tax states. Remember, New York is the only city in the U.S. with a progressive income tax. Most other places impose payroll taxes, paid primarily by employers. “Marginal” refers to the highest tax rate, applied to income over a cer- GREG DAVID tain amount. For federal payers, it’s $450,000 for families under the latest Washington deal, and in New York City, it’s $2 million for families. For some New Yorkers, their effective tax rate—taxes paid as a percentage of all their income—is even more painful. New York Times columnist James and business services, information industries and financial activities, although total employment levels are greater in New York. Six metro areas have higher rates of business creation than we do, and both Silicon Valley and New England have been attracting more venture capital. We lag far behind Silicon Valley in entrepreneurship, but our weakest performance is on quality-of-life measures—particularly the affordability of rent and the length of commuting times. Highly educated talent is mobile, so we need policies that reinforce and enhance our attractiveness as a place to live and work. These should include efforts—like the Bloomberg administration’s Applied Sciences Initiative that brought Cornell University to Roosevelt Island—that support education in fields where the metro area lacks depth, foster affordable workspaces for startups, improve broadband and Wi-Fi connectivity, advocate for visa protocols that allow foreign students to work and become residents, improve mass transit and stimulate housing development. New York cannot afford to take our competitiveness for granted.We must constantly assess and adapt to maintain our leadership. The competitiveness scorecard offers policymakers a tool to benchmark our performance and make improvements to strengthen growth in a rapidly changing economy. Bringing clients to the next level Industries served: Financial Services . Manufacturing & Distribution . Technology . Retail . Construction . Architecture & Engineering Real Estate . Healthcare . Transportation & Shipping 488 Madison Avenue, New York, NY 10022 50 Jericho Quadrangle, Jericho, NY 11753 www.grassicpas.com Carol Kellermann is president of the Citizens Budget Commission. TOP MARGINAL TAX RATES California New York City Hawaii Oregon New Jersey Washington, D.C. Wisconsin Maryland New York state Maine Nifty 8* 51.9% 51.7% 50.5% 49.9% 49.3% 49.3% 49.3% 49.2% 49.2% 49.0% 42.8% *Those with no state income taxes: Ark., Fla., Nev., N.H., S.Dak., Texas, Tenn. and Wyo. Source: Gerald Prante Stewart illustrated this point in two brilliant pieces last year. Because he lives in New York City and much of his compensation is freelance book royalties, Mr. Stewart pays regular income taxes, the federal alternative minimum tax, the self-employment federal payroll tax, the city income tax, the unincorporated business tax, even the MTA payroll tax. His effective tax rate was 37% in 2010 (compared with Mitt Romney’s 13.7% that year), before dropping to 33% in 2011. He paid 74% of all his taxable income to governments in 2010. Mr.Stewart makes it plain he’s not leaving the city he loves. The Times quotes entertainment zillionaire David Geffen saying the same about California. The question is whether everyone else who is rich agrees. The next year or two will show how much taxes matter to rich people. February 11, 2013 | Crain’s New York Business | 11 http://www.grassicpas.com http://www.cbcny.org http://www.grassicpas.com http://www.crainsnewyork.com/2013TopEntrepreneurs http://www.crainsnewyork.com/2013TopEntrepreneurs

Table of Contents for the Digital Edition of Crains New York - February 11, 2013

IN THE BOROUGHS
IN THE MARKETS
THE INSIDER
BUSINESS PEOPLE
CORPORATE LADDER
OPINION
GREG DAVID
REPORT: SMALL BUSINESS
THE LIST
CLASSIFIEDS
DIGITAL NY
FOR THE RECORD
NEW YORK, NEW YORK
SOURCE LUNCH
OUT AND ABOUT
SNAPS

Crains New York - February 11, 2013