New York State brought in a “temporary” millionaire’s tax shortly after the 2008 financial crisis. Twelve years later, that tax is not only still in place, it’s going up. Back then, the state budget was $132 billion; over the last twelve years, the population has flatlined. Yet the state, awash in money from the unexpected post-pandemic stock-market boom and from the federal bailout passed last month, keeps finding astonishing new ways to spend money. Indeed, it now appears poised to pass a $200 billion budget.
Millionaires are being squeezed even more than usual.
How long will New York’s most successful people remain content to be played for suckers?
New York’s budget (which was due last week but is tardy as usual) is on the verge of passing with a provision that would make some of its residents the most highly taxed in the country, ahead of even California’s. Today, New York State’s income tax for single filers above earnings of $1.08 million is 8.82 percent. The proposal currently circulating would create two additional tax bands at $5 million and $25 million of income. Single filers would pay a surtax of 9.65 percent above $1 million, then 10.3 and 10.9 percent, respectively, at income above the other two levels. Other taxes, such as death duties, are likely to go up as well.
These surtaxes sit atop the New York City income tax of 3.88 percent. So the most affluent New Yorkers can expect to pay 13.53 to 14.78 percent income tax on top of all their other tax bills. Legislators envision raising another $4.3 billion in revenue this way; perhaps they forget that highly affluent people are also highly mobile. That’s especially true in Anno Domini 2021, when Midtown and Downtown Manhattan remain largely deserted by the white-collar professionals whose income taxes fund the city and state.
If California looks affordable compared with New York City, why would anyone who can afford to live elsewhere stick around in this shambles of a city? Cuomo can hardly claim that he didn’t notice that high earners simply fled NYC and switched to remote work last spring, since he’s discussed it many times. Last summer he said that he was fully aware of how dependent New York was on its most successful professionals. He also claimed that he spent “all day long” talking to rich New Yorkers in their country houses, begging them to come back to the city and offering to cook them dinner.
New York State and City are unusually dependent on high earners; in the city, the one-percenters paid 42.5 percent of all income taxes in 2018. Meanwhile, the nightlife and performances that have long been the city’s principal attractions to affluent people remain mostly shut down. The streets are messier than they’ve been in decades, restaurants are operating at half capacity, homeless encampments are everywhere, and crime is way up. How does it make sense to raise taxes at a moment when the metropolis would seem increasingly familiar to Snake Plissken?
It doesn’t. What does make sense is that Cuomo is in the mood to give the left wing of his party everything its lawmakers want in hopes that they’ll forget about impeaching him for his well-documented history of sexual harassment. He’s hoping to buy his way out of a jam using the AmEx cards of the most successful New Yorkers.
In January, Cuomo sadly proposed raising income taxes on millionaires in a way that implied this grave step was contingent on no aid coming from Washington, D.C. “If the federal government doesn’t fund state and local governments, it’s going to hurt all New Yorkers,” Cuomo said then. “The new government didn’t cause the damage. But they are legally, ethically, and politically responsible for correcting it.” Cuomo requested $15 billion in federal bailout money over two years. The Democrats in D.C. came through with almost all of that: $12.6 billion, plus $6 billion for the city government. And that was just the no-strings-attached checks. The total amount of new federal largesse flowing to New York — including gargantuan checks for schools, for live performers, and for loan forgiveness — is about $100 billion.
Tax expert Kathryn Wylde, CEO of the New York City Partnership, told the New York Post that the federal bailout, which Democrats labeled the American Rescue Plan, “definitely closes the state and city budget gaps and makes tax increases this year or next unnecessary. . . . We are flush! If the state acts to raise taxes, it is a political statement aimed at punishing the rich — not a reflection of economic need.”
Cuomo then insisted he had to raise taxes anyway. This was back when the state was looking at a $193 billion budget. An additional $7 billion more got added in the last few weeks, as Albany legislators dreamed up new innovations like a plan to send out relief checks as large as $27,300 to illegal immigrants and criminals.
New York’s fiscal problem is never a lack of revenue but always a blazing inferno of spending. To put its Godzillan destruction of taxpayer earnings in context, consider that it spends more than twice as much as Florida ($97 billion), which has two million more people, and $87 billion more than Texas, which has almost ten million more people. Moreover, most of the richest New Yorkers are in effect living in a colossally spending state within a state. New York City alone spends more than 46 states do: $88 billion in the last fiscal year, going up to a proposed $92 billion in the next one. By contrast, the city of Los Angeles spends $10.5 billion despite having half as many residents as New York City; even famously profligate Chicago (a bit less than one-third New York City’s population) spends only $11.6 billion.
New York City’s famously demanding affluent class is casting its eye over a damaged landscape and wondering: Is this dysfunctional burg really worth the luxury price tag? Right now, every day spent in New York City is like paying Smith & Wollensky prices for an Arby’s sandwich, and so the New York exodus continues. Chasing more rich people and their tax revenue away is a formula for making a reeling city worse.