Tuesday, February 22, 2011

New Ruling Takes Sledge Hammer to Ulster County's Economy

Vacation home construction drives the economy in my home town of Olive, New York. The reason is that the Democratic Party-dominated government, led by  Congressman Maurice Hinchey, Assemblyman Kevin Cahill, Assemblyman Sheldon Silver and Governor Andrew Cuomo, have regulated and taxed away productive economic enterprise.  Population in Ulster County, New York has grown at one third the national rate as children have fled (often contrary to Democratic-voting parents' wishes) to Republican states like Colorado and Texas.  Not satisfied with the scope and extent of their economic devastation, the New York State Department of Taxation and Finance has recently won a case that is likely to accelerate it (h/t Glenda McGee).

The widely discussed case concerns a Connecticut couple who own a vacation home in the Hamptons.  They do not frequent the home.  They pay income tax to the state of Connecticut.  The New York tax code says that a cottage is not a permanent residence.  It also says that if you spend 183 days in the state then you are a permanent resident.  For the first time, the courts have held that you are a permanent resident even if you never spend time at a permanent vacation home.

The ruling, recently affirmed in the New York State tax appeals tribunal, will reduce property values throughout the state.  In New York City, the state can now claim that wealthy business executives from Europe and Texas must pay income tax to the City.  Many will sell their apartments instead.  On Long Island, many wealthy people own houses in the Hamptons but live as far away as Texas and Hollywood. These too are going to face pressure to sell rather than pay ten percent of their incomes to New York State.

The same is true in Ulster County.  Here, numerous New Yorkers own vacation homes in the Town of Woodstock, whose median income is the county's highest.  But a sizable percentage, perhaps ten percent, come from other states, especially New Jersey.  The effect will be downward pressure on property values.  There is also the question of people who live full time in Ulster County but own second homes in New York City.  Will they have to pay New York City income tax even though they do not live there?  This also could contribute to downward pressure on property values as they sell the second property in New York City.

Taxation interferes with property rights.  Since economic progress depends on property ownership, more aggressive tax systems such as are evolving in New York will be accompanied by fewer rights concentrated at higher levels.  New York's socialists imagine themselves to be egalitarian, but they are friends of plutocracy.  As aggressive taxes hamstring middle income Americans, the super-rich, who can afford to pay multiple income taxes, are able to purchase property at lower values.  George Soros reaps significant benefits from his contributions to the Democratic Party as the rest of the country becomes poorer and, thanks to the Democratic Party and the Rockefeller Republicans, income inequality is increased.

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