NYAPRS Note: Here’s a very timely article excerpted for brevity. Some highlights:
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Governor Cuomo’s opposition to wealth taxes may be weakened due to the sexual harassment scandal, especially with calls from the NYS Senate leader for him to resign and from the Assembly leader to consider resigning.
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The NYS Senate has introduced 8 wealth tax bills.
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NYS billionaires have seen their profits grown by $88 billion since the virus crisis hit New York a year ago.
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“New York has one of the most unequal distributions of income and wealth in the country,” said Michael Mazerov, a senior fellow at the Center for Budget and Policy Priorities. “People at the bottom pay a higher share of their income than people at the top do.”
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Several economists doubt that the billionaires will leave NY in the wake of a wealth tax.
Cuomo’s Harassment Scandal Could Pave Way For Wealth Tax
Governor may not have the political muscle to stop Albany from putting a levy on the top 1%
Excerpts by NYAPRS
By Brian Pascus Crain’s March 8, 2021
The sexual harassment scandal that has engulfed Gov. Andrew Cuomo could have a ripple effect on whether Albany passes a far-reaching wealth tax.
…Cuomo has generally been a hindrance to progressives in both chambers of the Legislature, but this year Senate Democrats are more intent to raise taxes on the richest New Yorkers than they have been historically.
“It’s obviously a distraction for the governor, and that’s one part of it,” longtime political operative George Arzt said. “The other part is the governor being in a weakened position, he will have a limited number of fights in him on budget items.”
No less than eight wealth tax bills have been introduced in the Senate’s 2021-22 legislative session. The bills seek to raise taxes on millionaire and billionaire residents through either higher income tax rates or new capital gains and stock transfer taxes.
…Budget negotiations could be further complicated in March if additional accusations are made against Cuomo.
“Will he cave to the progressive left on spending and taxes in hopes of softening the attacks on him over alleged sexual harassment?” McMahon asked. “That’s what it comes down to. Because he has the power. He’s still in the driver’s seat.”
A New Focus
For most of his 10 years as governor, Cuomo has resisted tax increases, going so far as to call a proposed millionaire’s tax “an impossibility” in 2017.
Cuomo’s long-held resistance to tax increases on the wealthy appears inspired by data that indicate those richest New Yorker’s already make a substantial contribution to the state’s financial portfolio….
Wealthy New Yorkers pay an 8.82% top marginal rate in state income taxes. Combined with the city’s 3.88% rate, that top marginal tax rate jumps to 12.7%, second in the nation only to California’s. The top 1% of earners—roughly 107,000 filers statewide—paid 38.3% of New York’s income tax liability in 2018, according to Department of Taxation figures. The top 0.03% with adjusted gross income of $10 million or more—roughly 2,722 state residents—paid nearly 20% of the state’s total tax liability in 2018.
But these numbers are simply not enough to many residents, especially to an emboldened Democratic Party voting base that elected Senate Democrats to a 43-seat supermajority in November. “I do think that people are tired of the same old, same old,” said Barbara Denham, senior economist at Moody’s. “There’s a lot of momentum behind this progressive movement.”
Growing Inequality
The devastation that the pandemic thrust on Black and brown communities in the outer boroughs laid bare deadly quality-of-life inequalities in health care and housing. Black and Hispanics accounted for 47% of all New York Covid-19 deaths, even though Black and Hispanics are only 33% of New York’s population, the Kaiser Family Foundation reported.
An analysis from the Center for an Urban Future found income disparities between Black and white workers in nearly every industry in New York City, and Data USA census reports showed more than 25% of Hispanics in the city lived below the poverty line in 2018.
There are 120 billionaires in New York state who hold more than $600 billion in wealth, Americans for Tax Fairness found. New York billionaires have seen their profits grow by $88 billion during the pandemic, the public policy group said.
“New York has one of the most unequal distributions of income and wealth in the country,” said Michael Mazerov, a senior fellow at the Center for Budget and Policy Priorities. “People at the bottom pay a higher share of their income than people at the top do.”
The top 1% took home 31% of the wealth in New York, according to 2015 data from the Economic Policy Institute, a liberal think tank. This same data show that the top 1% made 39.4% more than the rest of the citizenry, and the average income in Manhattan for the top 1% was $8.9 million; the remaining 99% average $79,528.
New Yorkers appear prepared to welcome what they consider a long-overdue increase on the wealthy, including members of the business community. Approximately 42.5% of 318 executives and business leaders surveyed by Crain’s this year say a “millionaires tax” should be imposed by the state to help pay for the city’s recovery.
All this has created difficult political considerations for the Senate.
“Not everyone is in favor of the millionaires tax in the Democratic caucus, but certainly the progressive wing of the caucus will be pushing for it and the governor will have a tough time,” Arzt said. “He can push back, but he doesn’t have the clout or intimidation that he did a few weeks ago.”
Sen. James Sanders Jr., chairman of the Banking Committee, includes sunset provisions in his wealth tax bill, so as not to alienate New York’s financial community.
“We have to do it in a way that does not kill the golden goose,” he said. “We are in a capitalist system, and we want New York to be the most effective place for capitalism to thrive in the nation.”
Sanders also introduced a bill that would repeal the rebate on stock transfers and allow those transactions to be taxed per trade. In his mind, moderate, “pragmatic progressive” policies, as he calls them, are not at odds with a capitalistic economy.
“We can ask for those who have done well during the pandemic to be patriots and aid us in this time,” he said.
Across State Lines
The overarching fear New York fiscal experts hold: The high tax policies will drive the wealthy to other states.
“The risk is the mobility of high-income earners,” said Andrew Rein, executive director of the Citizens Budget Commission. “Potentially their businesses can move and have an economically deleterious effect.”
New York Tax Commissioner Michael Schmidt warned that a stock transfer tax could cause trading activity to migrate across state lines.
The $10,000 cap placed on state and local tax deductions, or SALT deductions as they are commonly called, in the 2017 federal Tax Cuts and Jobs Act is another hindrance on New York’s ability to compete with other states.
But three economists are unconcerned that the proposed tax increases will actually lead the wealthy to flee to other states.
“This idea is absolutely overblown,” said Denham, who noted that Florida and Texas haven’t had personal income taxes for decades. “If people haven’t moved already, they won’t move again.”
In fact, the number of millionaires in New York state increased by 60% between 2010 and 2018, according to an analysis from James Parrott, an economist at the New School.
“The bulk of research shows interstate differences in tax levels have a very low impact on the rates of interstate migration,” Mazerov explained, adding that he supports a wealth tax. “Not nearly enough would move to change the fact that, on net, it would raise enormous amounts of revenue.”
Ultimately the tax proposals pushed by Senate Democrats will hinge on the political fortunes of an embattled Democratic governor facing the crisis of his career with a month to go before the next fiscal year begins.