Tax and fee burden a challenge for New York City and its businesses

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New York City’s regulatory and tax oversight of businesses is a balancing act between the desire to increase revenues and to improve human behaviors, according to an urban planning expert.

Nicole Gelinas, a senior fellow at the Manhattan Institute, said during a business round-table event in Queens Thursday that the Big Apple’s revenues from permits and licensing are up 54% in the last 10 years from to $770 million, a 19% jump when factoring in inflation.

Fine revenues levied against businesses have also risen in the last decade to $984 million from $825 million during the 2017 fiscal year, but Gelinas said that the enforcement increases are small in context of a nearly $90 billion budget and in many cases may harm the city’s overall health.

“It’s a lot of money that the city raises from businesses,” said Gelinas during the forum hosted by the Square Deal Committee, a newly formed nonpartisan think tank and advocacy group. “How do we know if these fines, fees, and permits are fair? Unfortunately we really don’t.”

Gelinas noted that fines that stop “bad behavior” are positive, but if business owners simply decide to pay penalties as “a cost of doing business” it creates a negative climate that can harm law-abiding businesses throughout the city. New York City business owners also face fiscal stresses from contributing to a Metropolitan Transportation Authority payroll tax combined with a high state income tax. She stressed that the city’s sixth highest sales tax in the nation at 8.875% is an added barrier for the long-term success of businesses.

“You are asking people to pay almost 10% more on the cost of a product because of this high sales tax,” said Gelinas. “This is a burden for retailers, particularly in the Amazon era.”

Mayor Bill de Blasio has proposed an $89.1 billion 2019 fiscal year budget proposal that accounts for $27.8 billion of property tax revenue and $31.2 billion from other taxes. The city, which had $37.6 billion of general obligation debt outstanding as of March 31, has bond ratings of Aa2 by Moody’s Investors Service and AA by S&P Global Ratings and Fitch Ratings.

New York City’s high taxes and fees are attributed largely to soaring benefit costs for public sector employees, according to Gelinas. New York City’s five pension systems for municipal employees paid $12.9 billion in benefits last year to more than 332,000 retirees or their beneficiaries, according to the Independent Budget Office. Gelinas said that in two years combined healthcare and pension benefits for retirees will account for nearly $25 billion of the city’s budget.

“These costs are unsustainable,” she said. “It would be more rational to change it gradually and not wait for a fiscal crisis to occur.”