Obama's Tax and Spend Policy Would Hit NYC Metro Area Hard

New York City and the surrounding region is highly dependent on Wall Street. In particular, the City and NY State reap the benefits of Wall Street to the tune of tens of billions of dollars every year.

If Barack Obama got his way, that cash cow would be slaughtered on the altar of tax and spend.

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.

Obama wants to reassert higher capital gains taxes, which would put a strangle hold on Wall Street and curb new investments. It would act as a further brake on the economy and investment houses in the region would suffer accordingly.

It would seriously harm New York and New Jersey, and yet the statewide elected officials have not reacted as they should given the terrible fiscal toll is imposed by an Obama administration. You can hear the crickets chirp as Obama lays out his tax grab scheme, even though both New Jersey and New York would get hit hard by the capital gains changes.

The local economies would suffer an additional shock since Wall Street workers live throughout the region and their spending would be curtailed as well. That would mean lower state tax revenues from sales, income, and property taxes, to say nothing of lower federal income tax revenues. It's a ripple effect that no one in the Obama campaign, let alone Democrats who support this kind of tax grab wants to talk about.