New York State’s senior U.S. senator played a leading role in yesterday’s unveiling of Senate Democrats’ latest version of a federal “millionaire tax” — this one limited to people who actually earn $1 million or more a year of taxable income. The proposal is intended to win support form wavering Senate Democrats for President Obama’s “Jobs Act” — which, in its current form, would be financed by reducing tax exemptions and raising rates on incomes starting around $250,000.
In explaining why he favored a 5 percent federal “surtax” kicking in at the $1 million level, Sen. Charles Schumer also provided ammunition for opponents of extending New York State’s temporary income tax hike on high earners, which hits incomes as low as $200,000 for singles and $300,000 for couples.
At yesterday’s Senate Majority press conference in Washington, Schumer said:
In the eyes of many, it is hard to ask more (of) households that make $250 or $300,000 a year. Many of … they are not rich and in large parts of the country, that kind of income does not get you a big home or lots of vacations or anything else that’s associated with wealth in America. It also would affect too many small businesses if you drew the line below $1 million. There are businesses, small businesses, that struggle, so we believe $1 million is the right line, because in many parts of the country, there are two-income households that earn that much [$250,000]. It doesn’t make them rich. They are firmly in the middle class, same with small business owners in that level.
Since New York is home to a disproportionate number of American taxpayers with incomes of $1 million or more, Schumer is still effectively demanding that the federal government take more from his own state’s income tax base. The usual effect of a sharp marginal tax hike on a people with broad discretion over the timing and nature of their income is to depress growth in that portion of the tax base, which would inevitably depress revenues for both the state and New York City.
The tax surtax starting point now being pushed by Schumer and other Senate Democrats in Washington is at least consistent with the latest tax hike proposal from Assembly Speaker Sheldon Silver, who wants to extend the current state tax hike — raising the maximum rate from 6.85 percent to 8.97 percent — only on incomes starting at $1 million. It’s been estimated that Silver’s proposal would raise about $2.65 billion in fiscal 2012-13, or about $1.4 billion less than the current version of the temporary tax due to sunset at the end of this year.
