Democrats in the state legislature support new, higher taxes on New York’s richest residents as part of the new state budget. They say a newly released study that shows that the state’s 120 billionaires increased their wealth by $88 billion dollars during the pandemic bolsters that claim. But Governor Andrew Cuomo continues to resist raising their taxes.
The study, by the left leaning groups Americans for Tax Fairness and Health Care for America Now, calculates that the state’s billionaires, who include Michael Bloomberg the Lauder family, David Koch and Rupert Murdoch, saw their earnings and investments rise by 16.8% during the first ten months of the pandemic.
At the same time, over 1.3 million New Yorkers fell ill with COVID-19, more than 43,000 died and 4.6 million lost their jobs.
Ivette Alfonso heads Citizen Action New York, a reform advocacy group. She says while New York’s financial industry took a hit during the last economic downturn – the Great Recession of 2008 and 2009 – this time, Wall Street and wealthy investors flourished.
“A lot of folks say, ‘well, they worked for this money, they deserve it, and all that’, and nobody says they shouldn’t have money, but they really don’t work for it,” Alfonso said. “They make their money out of investments, and paying out shareholders. We’re the ones who work for this money, and we really should be getting some benefits out of it.”
Citizen Action and others who support taxing the wealthy would like to see several changes, including a higher capital gains tax, reinstating the stock transfer tax, and imposing higher inheritance taxes on large estates. They estimate the taxes, when fully implemented, could bring in $29 billion dollars in revenue a year and help pay for programs.
“That would be quite a lot of money that would go toward solving our budget problems,” Alfonso said. “And also providing the services we need.”
Governor Cuomo’s budget plan proposes adding a new tax bracket for those making more than $5 million dollars a year. It would include a pre payment option so that wealthy taxpayers could pay their taxes in advance for the next two years at the lower 2020 rates.
The next phase of a middle class tax cut would be also be postponed.
Despite including the proposals in his budget, Cuomo continues to make the argument against them, saying that there’s a danger that the wealthy will leave the state.
He spoke about it most recently on February 22nd , making the argument that a national income tax hike on high income earners is the better course.
“This nation should have a tax increase on the wealthiest Americans to provide the relief necessary to states,” said Cuomo, who said otherwise individual states are “forced” to raise taxes.
“When an individual state raises taxes, it now puts that state at a competitive disadvantage with other states,” Cuomo said.
At a legislative budget hearing, Cuomo’s tax commissioner, Michael Reed Schmidt, also expressed reservations. He says the pandemic related shut downs have accelerated a trend toward working from home, meaning that more people can do their job from nearly everywhere. He says another factor is the change made under former President Donald Trump that ended the ability of New York taxpayers to deduct some state and local tax payments from their federal taxes.
“When you combine that with the impact of the pandemic, which has totally upend how people think about residency, about how people think about where to locate their work ,” Schmidt said. “I think there’s good reason to be cautious around a whole number of these measures.”
Michael Kink, with the Strong Economy for All Coalition, is one of the advocates for higher taxes on the wealthy who testified at that hearing. He calls warnings that the rich will leave the state the “myth of the moving millionaires”. He predicts that people will come back to New York City and other urban areas after the pandemic is over. He says after 9/11 and the Great Recession, the City recovered, and thrived.
“In both cases, within the next two years, the entire market and the entire social cultural and economic infrastructure of New York was back in place,” Kink said. “You can look to ancient history, people moved back to London after the plague” .
Cuomo is hoping that a federal relief package will make the tax increases unnecessary. He’s seeking $15 billion dollars to close a shortfall in the current state budget and a projected gap in the new fiscal year. The most recent package, supported by Democrats in the House of Representatives, would give New York $12.7 billion dollars to handle its budget shortfall.
Advocates for taxing the rich say even if New York gets enough money to balance its budget for this year and next, the federal infusion of cash is a one time event. They say the state will still need revenue to close the budget gap in future years, when the federal money is gone.