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New York Post

 

How City Hall Kills The Middle Class

July 29, 2014

By Steven Malanga

Mayor de Blasio never tires of repeating his successful campaign theme: There are “two New Yorks,” he says, one for the rich and the other for everyone else.

Too bad he never acknowledges the role government plays in making the city so unaffordable for middle-class families.

From its arcane regulatory regime to the nosebleed taxes and fees it imposes on firms and individuals, City Hall drives up the cost of living and working here dramatically, making it harder for ordinary New Yorkers to get ahead.

Just look at housing. A 2005 NYU study found a host of government policies that drive construction prices higher in New York than in any other city in America (San Francisco was second).

For starters, city agencies responsible for overseeing and regulating building are often openly hostile to new construction.

Even experienced builders typically must employ well-paid “expediters” to move projects through the city's foot-dragging approval process, adding an average cost of about $200,000 per building.

Taxes and fees tied specifically to development — many of them rare in other cities — also contribute to Gotham's sky-high building costs. And it's not just a Manhattan problem.

According to the NYU study, the cost of erecting a 15-story, multi-unit apartment building in The Bronx was nearly $20 higher for every square foot than in Chicago, $26 more than in Los Angeles and a whopping $55 higher than in Dallas

Needless to say, such expenses push up rental rates in the city's unregulated apartments. The average asking price for an unregulated apartment here is $3,000 a month — nearly three times the national average.

New York puts added pressure on residents and businesses through its extraordinarily high taxes, which ripple throughout the economy and raise prices for everyone, “everyday people” included.

New Yorkers pay more than three times as much in city and state income taxes than do residents of other large cities. This burden falls not only on the rich but also on middle-income families.

For a family earning $100,000 a year — hardly plush in New York — the typical tax burden is $2,850 higher annually than in other big cities.

In New York, state and local government takes, on average, 120 percent more in taxes per $100 of income than is taxed in Houston.

As my City Journal colleague Edward Glaeser has shown, after accounting for the costs of housing, taxes and transportation, the average Houston family has 50 percent more income to spend than the average New York family.

The difference in real dollars: about $32,000 in spendable money for the typical Houston family, compared with just $21,000 for the New York family.

City government also pushes up prices at establishments that do business directly with consumers, such as retailers and restaurants.

A Bloomberg administration study found the city has 100 fewer supermarkets than it needs to adequately serve its population.

Yet the political class has thwarted Wal-Mart's efforts to open a branch here, despite surveys showing that New Yorkers overwhelmingly want the stores, with their low prices and broad selection.

The higher prices that result from such restrictions on commerce are a serious burden to ordinary New Yorkers, who can't regularly leave to shop in the suburbs.

Just compare the cost of basic necessities in New York with that in other cities. A quart of milk costs 55 percent more in New York than in Las Vegas; a dozen eggs cost 34 percent more here than in Houston; two pounds of apples cost 22 percent more in New York than in Colorado Springs.

New York is unquestionably a city with substantial inequality. A Brookings Institution study ranked it fifth among the nation's 50 largest cities in the gap between rich and poor.

But the mayor's policy agenda — demanding that businesses grant employees paid sick leave and compelling real-estate developers “to build affordable homes for everyday people,” among other steps — will only make the problem worse.

Many firms, including eateries and supermarkets, run on very low profit margins.

A survey by the NYC Hospitality Alliance estimates that providing five sick days for a restaurant with 12 employees will cost the establishment about $5,000 a year in wages alone.

If the mayor paid more attention to how New Yorkers are taxed, he'd understand how heavily the city's excessive levels of taxation fall on the non-wealthy and job creators.

The city should lower its regressive local-sales levy, the sixth-highest city-based sales tax among the 100 largest municipalities in America.

This tax hits especially hard on lower-income residents, who pay a larger percentage of their incomes on sales taxes than other households.

All these factors — the expensive housing, fat tax bills and high prices — have a direct and powerful effect on people's daily lives.

The real dividing line in New York is between, on the one hand, ordinary citizens and business owners, struggling to make a go of it in one of the nation's most expensive cities; and, on the other, America's costliest and most intrusive government.

What de Blasio doesn't seem to recall is that the Charles Dickens novel he invokes with his “two cities” reference is foremost a tale about the damage that a coercive government does to its own people.

Original Source: http://nypost.com/2014/07/28/how-city-hall-kills-the-middle-class/

 

 
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