The New York State Legislature’s Democratic leadership has flexed its muscle by working tax increases into the state budget that are greater than Gov. Andrew M. Cuomo wanted to implement.
The higher tax rates, primarily affecting millionaires and corporations, are intended to pay for a host of new spending. Much of the spending is necessary due to the yearlong-plus pandemic, though with the largesse New York will reap from the federal American Rescue Plan, there should be some restraint in the expenses that lawmakers are asking taxpayers to cover.
Most of the new tax hikes are on the 50,000 residents who make more than $1 million in annual income. That number sounds relatively small, but the top 2% of the highest-income New York residents pay about half of the state’s income taxes.
Millionaires in New York City will pay the highest combined tax rate in the country. The current highest rate is paid in California.
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The soak-the-rich philosophy favored by the state Democratic Party’s progressive wing carries risks. Remote work and video conference meetings during the Covid-19 pandemic have shown many people that technology enables their lives to be portable. Wealthy New Yorkers are outwardly mobile.
Florida, which has no state income or estate taxes, has seen a population boom during the pandemic. According to worldpopulationreview.com, the state’s population has grown by about 343,000 in the last 12 months, to 22 million residents. Many of the new arrivals are fleeing higher-tax states like New York, New Jersey and Connecticut. A noticeable exodus began when federal tax legislation in 2017 capped the amount of state and local taxes that can be deducted at $10,000.
When Republicans were in the majority in the State Senate, they often applied the brakes to runaway spending proposals. With the Legislature under one-party rule since 2018, Democratic leaders have free rein to up the ante at budget time.
Legislative leaders were also emboldened by the political pressures Cuomo is facing this year, over his administration’s reporting of nursing home deaths and accusations of sexual harassment or misconduct.
The tax increases would raise an estimated $4.3 billion a year. Part of the budget deal reportedly will include the legalization of sports betting, which could bring in an additional $500 million in new revenue within two years. And the legalization of adult-use marijuana is expected to provide $350 million a year when fully implemented.
Cannabis and sports betting both have the potential to become addictive, and so does state government spending. The budget does contain one middle class tax-cut provision, but it increases spending from the previous year by 10%. “Building back better,” to use President Biden’s campaign slogan, does make sense when recovering from a pandemic. That does not mean the state should go on an unlimited shopping spree for which taxpayers must foot the bill.
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