M E M O R A N D U M

TO: Governor Andrew Cuomo Senate Co-Leader Dean Skelos Senate Co-Leader Jeffrey Klein Assembly Speaker Sheldon Silver Members of the NYS State Legislature Kathryn S. Wylde President & CEO, Partnership for New York City Extension of the High Earners Surcharge March 15, 2013

FROM: RE: DATE:

The Partnership for New York City represents businesses that employ 1.3 million New Yorkers and contribute $202 billion annually to the states economic output. On their behalf, we are writing to express deep concern with the possible early extension of the personal income tax surcharge on high earners that is scheduled to expire in 2014. The substantial federal tax increase on high earners that was enacted in January to avoid going over the fiscal cliff has changed our position on the impact of the surcharge, which we reluctantly supported as a temporary measure to deal with a state fiscal emergency last year. Circumstances have changed dramatically and we are convinced that extension of the surcharge at this time is the worst possible message New York State could send to our most important job creators and revenue generators. As of 2013, the combined marginal effective tax rate for many of New York Citys highest earners is 54% of their wages, up from 48% last year. Threatened federal caps on deductions would substantially increase that number. The top 1% of earners in New York State contribute 41% of all personal income tax revenue. Any of these taxpayers can decide to spend fewer than 184 days in New York and move their permanent residence to a no- or low-tax state. This year, many more than in the past are actively pursuing that option. Not only are people considering leaving, but new businesses that would have come to New York are going elsewhere. Florida, Texas, Utah and even Puerto Rico are aggressively working to attract jobs away from New York with the promise of tax relief. Florida is running advertisements that feature warm weather and zero income tax. A new report by the Center for an Urban Future cites a 34% increase in the number of New York City residents relocating to Texas (Houston, Austin, Dallas, Fort Worth and San Antonio) over the last five years. The common denominator among the most fiercely competitive states is low taxes. New York is expensive. That fact will never change. But many New Yorkers will pay more in personal income taxes this year than they ever have. For high earners considering a move to New York, it amounts to sticker shock. Our global brand is morphing from business capital to tax capital. The Partnership for New York City respectfully urges the Governor and the State Legislature not to extend the high earners surcharge without careful research and a full public discussion of the impact this action may have on jobs and the economy. Thank you for your consideration.