Obama Capital Gains Tax Hike Would Hit N.Y. Hard

The New York Sun reports:

As Senator Obama's presidential platform starts to take shape, economists and tax officials here in New York and Washington are warning that his fiscal policies could have a devastating effect on what is, in effect, New York's biggest crop — capital gains.

Mr. Obama is proposing to raise taxes on capital gains and dividends by a staggering two-thirds, moving the rate up 10 percentage points to 25%, which could curtail investment and business on Wall Street, a backbone of the city's and state's economy.

According to the Institute for Research on the Economics of Taxation, Mr. Obama's tax hike would knock off $2.5 trillion in capital formation over five years, or nearly 2% of gross domestic product.

"If we are only growing around 2% over the next five years, then we will have virtually zero growth for the period," the president of the institute, Stephen Entin, said. "This will create a permanent hit of 5% or greater to GDP."

The effect on New York will be even more acute: Wall Street accounts for nearly 9% of the city's tax revenues and up to 20% of the state's revenues; the city collected more than $3.3 billion in tax revenue from the securities industry in fiscal year 2007 and New York State collected $9.6 billion, according to New York State Comptroller Thomas DiNapoli. In addition, every job added on Wall Street results in the creation of two additional jobs in other industries in the city, and one additional job in the suburbs.

"New York does have a high fraction of its income earned from capital gains and dividends," a senior economist at the Tax Foundation, Gerald Prante, said. "New York would be one of the hardest hit areas; there is no doubt about that."

Barack Obama may do more to move New Yorkers to Georgia and Texas than anyone could imagine.