Very soon after New Jersey announced that it was raising income taxes on residents making more than $1,000,000 a year, Governor Andrew Cuomo's budget director, Robert Mujica, urged New Yorkers to "make sure the discussions are informed" when it comes to raising our own income taxes on the rich to address historic budget deficits and ease the suffering of millions of New Yorkers who are struggling to survive in a global pandemic.
"The overwhelming majority of billionaires and millionaires in this state live or work in New York City. The combined state and city income tax rate is already 12.6 percent—which is higher than New Jersey's new top rate or a proposed 12 percent 'billionaire/millionaire tax rate,'" Mujica said.
The budget director, who previously advised Republicans in the state senate, essentially made the same argument that Governor Cuomo has been making for months: taxes are high enough in New York, and raising them would scare away wealthy residents, who already pay a disproportionate amount of the taxes in the state and the city.
About those New Yorkers: in 2016, according to the city's Independent Budget Office, 32% of all the city's reported income—more than $100 billion—came from just 1% of New York City's 2,630,550 taxpayers. Of that mountain of cash, more than $43 billion was made by the lucky 1,412 residents who report an income exceeding $10 million a year. This massive income disparity makes New York one of the most inequitable places in the country.
Would those residents really leave the state if New York hiked its effective income tax rate to 13.3%, which is what currently exists in California? Or say, 14.3%, which is what New York's top combined state and city rate was in the early 1980s? (The rate started at 16% in 1966, and reached a high of 19.68% in the mid-seventies during the fiscal crisis, before beginning a steady decline.)
The Cuomo administration has not issued any hard evidence that the ultra-wealthy would flee New York en masse if their taxes were hiked. But Governor Cuomo has shared the details of his many calls with the state's elite earners.
"I literally talk to people all day long who are in their Hamptons house who also lived here, or in their Hudson Valley house or in their Connecticut weekend house, and I say, 'You gotta come back, when are you coming back?'" Cuomo said during a press conference last month, when asked if he'd support an array of new taxes that are currently being proposed on the wealthy.
In a statement, Freeman Klopott, a spokesperson for the Cuomo administration's Budget Division, said, "Today’s highly progressive tax code and dramatically different tax base is incomparable to those of over 30 years ago, particularly in a modern environment where the workforce is highly mobile – more clear now during the pandemic than ever before."
Klopott reiterated that New York is "highly dependent" upon high earners for tax revenue, and insisted that the threat of their relocation is real. "Next week, the New York Stock Exchange will test servers in the Midwest in preparation for a tax increase on stock transactions. Migration and behavioral changes in response to tax increases are real issues that deserve a rational, intelligent, and informed discussion."
Jonas Shaende, the chief economist for the Fiscal Policy Institute, which has advocated for new taxes on wealthy New Yorkers, said that Mujica's statement actually made the point that despite New Jersey's lower tax rate, wealthy people "still chose to live and work in New York."
"If you consider the history of our taxes in New York state, the taxes were much higher in the past, and the difference [between New Jersey and New York] was quite high, and still wealthy New Yorkers chose to live and work in New York simply because it’s a good place to be," Shaende said. "It's a place where there is a vibrant economy for them to participate in, where there is a highly educated workforce and a robust labor market to hire people and create value."
Shaende added that if New York bumped its top state bracket to 10.75, like New Jersey, it would raise $5.8 billion for the state, which is currently facing a $14 billion budget deficit. He cautioned that "taxes aren't everything," and that the state and city need a combination of federal funding, higher taxes, and borrowing capabilities to weather the pandemic.
"A multimillionaire tax, a pied-à-terre tax, a mark-to-market tax, we should do other potentially creative new policies so that we don’t just have one solution," Shaende said. "It is natural in a highly unequal state like New York, which is the most unequal state in the country, to look for the source of funds at the very top of our economic hierarchy."
This story has been updated to reflect a comment from the New York State budget division.
