Fortune 500 Postscript

No sooner had we issued our editorial of yesterday, about the news that Texas had surpassed New York as the state with the most headquarters of Fortune 500 companies, than we got a wire from the fiscal sage of the Manhattan Institute, E.J. McMahon. He corrected our assertion that one of the reasons companies are fleeing New York is that the state's 7.5% top corporate income tax rate is high compared to states such as Texas, which have no corporate income tax at all. (Texas does have a gross receipts tax that, by the Tax Foundation's calculus, works out to the equivalent of a 1.6% income tax.)

In fact, Mr. McMahon's wire noted, the top statewide corporate tax rate in New York is no longer 7.5%, it's 7.1%, having been reduced last year. But, he went on, the rate in the entire metropolitan region is subject to a 17% mass transit surcharge, which brings the current state tax corporate rate to 8.3%.

And there's more. Mr. McMahon added that New York City imposes its own unique corporate income tax, not deductible on the state tax. This brings the combined corporate tax rate in NYC to 17.23%. No wonder existing businesses are fleeing, and new ones are choosing to start up elsewhere. Instead of figuring out how to bring these rates down, our politicians are busy trying to figure out how to jack up taxes on those few who have avoided getting soaked by the current corporate tax system, targeting the carried interest earned by managers of hedge funds, real estate investment trusts, and private equity funds -- i.e., the few businesses that have been growing in New York lately rather than leaving for Texas.