Your current web browser is outdated. For best viewing experience, please consider upgrading to the latest version.

Donation - Other Level

Please use the quantity box to donate any amount you wish. Sign Up to Donate


Send a question or comment using the form below. This message may be routed through support staff.

Email Article

Password Reset Request


Add a topic or expert to your feed.


Follow Experts & Topics

Stay on top of our work by selecting topics and experts of interest.

On The Ground
Main Error Mesage Here
More detailed message would go here to provide context for the user and how to proceed
Main Error Mesage Here
More detailed message would go here to provide context for the user and how to proceed

Manhattan Institute

Close Nav
Share this commentary on Close

NY's Hope For Growth


NY's Hope For Growth

April 30, 2001
Urban PolicyNYC

The trends that have driven the city's enormous expansion of the past eight years—producing 430,000 new jobs throughout the five boroughs—suggest that New York may not fare as badly in the coming national slowdown as it did at the end of the '80s, when it entered a steep recession.

Gotham even stands a good chance of getting off lightly and, when growth resumes, of propelling its newly diversified economy into uncharted, higher-employment territory. But here's where wise policymaking will be a make-or-break matter.

The first priority—after making sure with almost religious dedication that crime stays down—will be to cut taxes. The city still labors under the most oppressive tax burden of any major U.S. metropolis.

According to the Independent Budget Office, in 1997 (the last year for which complete data are available), New York collected $7.99 for every $100 of taxable personal and business income combined. Los Angeles' figure: $4.21 per $100. The average of the 10 largest U.S. cities: $4.46 per $100.

These stark differences don't worry some Big Apple mayoral candidates, who are already arguing about how much to raise taxes. If high taxes really hurt the city, they demand, why would Gotham's economy have rebounded so strongly in the last few years?

The answer is simple: This revival began after a steep recession had driven the city's other costs way down. Now all costs have risen, and the high tax rates make the city unaffordable again for many businesses, and especially for entrepreneurs.

The new mayor will have no trouble finding legions of anti-competitive taxes worth cutting or ending entirely:

* The city personal-income tax. Major cities like Los Angeles, Houston and Chicago don't have income taxes, and New York's is by far the highest of those cities that do—$1.68 out of every $100 its citizens earn, adding up to an average of $1,364 per taxpayer.

* The city's absurdly high business taxes. Gotham's government takes $1.31 in business taxes for every $100 of taxable income New York produces, compared with just 19 cents per $100 in the next nine biggest cities combined. The city col- lects $3.3 billion in business taxes a year; the next-largest city, Los Angeles, collects less than $300 million.

* The city's commercial-occupancy tax is the only tax on rent in America.

How to pay for such tax slashing? First, tax cuts will boost economic activity and so will partially pay for themselves. But it will also be crucial to rein in spending by the city government, which spends far more than any other U.S. city to run itself.

Paying for the tax cuts will require boosting the productivity of city workers, too. It will fall to the next mayor to push union bosses to accept efficient labor practices that are standard in the private sector. The Citizens Budget Commission estimates that the city could save $1.4 billion by such everyday practices as giving bigger raises to the categories of workers hardest to hire, instead of giving the same percentage hike to all unions. It should also eliminate or merge scores of useless agencies: The Consumer Affairs Department and the Public Advocate's office, for example, both replicate tasks done by other city or state bodies.

To foster real and lasting job growth, the next mayor will need to figure out where to house future new companies and their workers. There is little affordable space to nurture new industries.

The biggest development opportunity clearly lies in Manhattan, from 28th Street to 42nd Street, west of Ninth Avenue. This could become the third major business district. It could accommodate 32.5 million additional square feet of development; rezoning could boost that number to 65 million feet, a mix of office towers, hotels and stores.

The city should commit to a master plan that allows for at least 15 million square feet of new office space in the neighborhood. That means that the next administration will have to fend off proposals to devote most of this land to non-business or that envision using it for a publicly subsidized Olympic stadium.

The next mayor needs the imagination to conjure up new office space at prices that can keep New York competitive with rents in New Jersey and Connecticut. For many relocating companies, lack of New York space at any price is as significant a problem as rising costs.

But Downtown Brooklyn, a good alternative, is fast running out of developable office sites. The city could begin by rezoning to allow bigger office buildings to be built there, producing up to 15 million square feet of additional developable space.

Most New Yorkers love the vibrancy the boom has brought. But no mayor in living memory has explicitly, convincingly made the case for an expanding, opportunity city. It's a serious political failing; and if the next mayor lacks the understanding or the political will to forge—and sell—a bold economic policy, he'll squander an opportunity that the city hasn't seen for half a century.

Adapted from the Spring issue of the Manhattan Institute's City Journal, where Steven Malanga is a contributing editor.