New York and Millionaire’s Tax
May 27, 2010
New York is considering increasing their millionaire’s tax:
New York Assembly Speaker Sheldon Silver is reportedly pitching a plan for an increased “millionaire’s tax” aimed at 75-85 thousand New Yorkers making $1 million or more a year.
Political columnist Fred Dicker , who appeared on Wednesday’s Good Day New York, says Silver secretly proposed a $1 billion tax hike on the highest income earners to Gov. Paterson.
The plan would jack up a current millionaires tax another 11-percent. The current “millionaire’s tax” actually starts affecting people who have incomes over $200,000. High income tax earners would pay more than 13-percent of their salary in local taxes.
There are a couple of reasons why states should keep clear of millionaire’s taxes. First, the revenue from a progressive income tax structure relying on the wealthy can be volatile relative to other types of taxes—for example a consumption tax. This is for a couple reasons. For one, the rich generally rely on the market for their millions. When the market tanks so can their income and so can the state’s tax revenue (as we have seen). Another reason why millionaire’s taxes can give the state an unstable revenue stream is that the rich can leave the state if they really do hate it. In fact it’s easier to leave a state if you’re rich.
According to this article the tax would be targeted at around .4% of the population. What principal of governance allows one to tax .4% of the population more to pay for the same public services consumed by the other 99.6%? If you think the perfect theoretical tax system is one approximately adhering to the benefit principle—you pay for the government services you use—this is a nightmare. Tuning up the tax rate to raise a billion dollars from a select minority goes beyond most concepts of fairness, even if one believes the wealthy owe a bit more to society. It’s opportunism.
More on millionaire’s taxes here.
More on New York here.
Update: Gov. Paterson doesn’t favor the plan:
“We taxed millionaires last year to the tune of $4 billion,” Paterson said.
“I’m not going to make the same mistake twice.”