Friday, March 4, 2011
Albany Tax Men Bleed Ulster County's Economy
I just submitted the following article to the Lincoln Eagle. It's based on an earlier blog I had done on the Barker residency case.
Albany Tax Men Bleed Ulster County's Economy
Mitchell Langbert, Ph.D.*
Where is Assemblyman Kevin Cahill now that we really need him? A recent ruling by the New York State division of tax appeals in Troy[i] directly threatens Ulster County's moribund economy. But Assemblyman Cahill, Ulster County's state assembly representative, has taken no steps to propose legislation to overturn the ruling.
Administrative Law Judge Joseph W. Pinto held in November that John and Laura Giarraputo Barker of New Canaan, Connecticut are residents of New York State even though they visit their vacation home in Napeague in the Hamptons only four or five weekends a year. In 2002 they were there for Memorial Day, July 4th, July 19-21, August 7-10 and Labor Day weekends. Most of the time Mrs. Barker's parents, the Giarraputos, live there because her father runs a fishing boat charter business.
John Barker is an investment manager for Neuberger Berman in Manhattan. He commutes from Connecticut to Manhattan each day. As a result, he spends more than 183 days in the state each year even though he was seldom at the 1100 square foot weekend cottage in Napeague. The house is insured for $228,000 with flood insurance of $250,000. Mr. Barker earns more than one million dollars per year. The house is flimsily constructed. For instance, there is no interior wall insulation. Even though the tax law says that cottages and camps are not permanent places of abode, the tax appeals court held that the Barkers' home is a permanent residence (even though the Giarraputos lived there most of the time). As a result, the Barkers are responsible for back taxes and penalties from 2002 to 2004 of $904,489.00
New York Tax Law holds that someone who is not domiciled in the state but maintains a permanent place of abode and spends more than 183 days of the taxable year in the state is a resident. That is, Mr. Barker worked in Manhattan more than 183 days per year and owned the cottage on Long Island. The court held that the cottage is a permanent dwelling. Therefore, Judge Pinto held, he must pay the $904, 489 in taxes and penalties.
Vacation home construction drives much of Ulster County's economy. The reason is that the county's Democratic Party-dominated representatives, led by Congressman Maurice Hinchey and Assemblyman Kevin Cahill, have voted for regulation and taxation that have driven businesses away. Population in Ulster County, New York has grown at one third the national rate as children have fled to Republican-run states like Colorado and Texas. Not satisfied with the scope and extent of the economic devastation that they have caused so far, tax-and-spend Democrats are rejoicing now that the Barker ruling will reduce vacation home building here.
Threatening prospective vacation home buyers who do not really live in the state with punitive income taxation is a sure way to reduce demand for vacation homes, reduce employment, and reduce property values throughout Ulster County. Can we expect Assemblyman Cahill to take action on this assault on the county's economy, or will he continue to sing the Cahill Street blues?
Numerous New Yorkers own vacation homes in the Town of Woodstock, whose median income is the county's highest. But many weekenders come from other states, especially New Jersey. The effect will be downward pressure on property values as they sell here and buy at the Jersey shore.
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? In an article on February 23, 2011 The New York Times reports that people who own apartments in New York have to be able to positively prove that they were not present in the city 183 days or more to avoid income tax liability. The article cites examples like Thomas Puccio of Weston, Connecticut, who presented affidavits from Weston stores to prove that he was in New York City only 111 days but was nevertheless held to owe $271,382 in income taxes to the city and the state. The burden of proof is placed on the taxpayer, and the tax courts know who their bosses are: the state's tax-and-spend politicians and unions.
Taxation interferes with property rights. Since economic progress, which makes the middle class wealthier, 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. The middle class will not be able to afford the legal fees necessary to cope with aggressive and confiscatory tax policies. New York's Democratic Party and Rockefeller Republican 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 (people like Barker and Puccio, who was Klaus von Bulow's lawyer), 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 income inequality is increased.
*Associate Professor, Brooklyn College. Dr. Langbert blogs at http://www.mitchell-langbert.blogspot.com.