The state Legislature should join Governor Cuomo in resisting and rejecting proposals to further increase state taxes on New York’s highest earners, E.J. McMahon of the Empire Center testified to the joint legislative fiscal committees today.
McMahon, the Center’s founder and research director, also encouraged lawmakers to expand Cuomo’s proposed enhancement of the child credit. He said the state should double the maximum credit, from $333 to $666, and pay for the change by repealing the $110 sales tax exemption on clothing and footwear purchases.
On other Cuomo initiatives, McMahon urged rejection of Cuomo’s proposal to extend for one more year, through 2025, the state’s $420 million in annual tax subsidies for film and TV productions made in the state. “It’s high time to call a ‘wrap’ on the film tax credit program in its entirety,” he testified.
Turning to various proposals for raising taxes on high earners, McMahon cited data showing that New York’s base of resident income millionaires increased more slowly than the national average from 2008-2016, during the first eight years affected by a supposedly temporary “millionaire tax” rate that has been repeatedly extended at a slightly lower level under Cuomo.
There was a striking difference in the incomes of New York’s highest earners, which rose only 16 percent during the period, compared to 26 percent for millionaires nationally. But “nonresident” taxpayers, who cannot be taxed by New York on labor and investment income earned in other states, expanded very rapidly, McMahon noted.
“From 2008 to 2016, New York State’s tax base added more than 15,000 nonresident filers, an increase of 53 percent, according to state tax data,” McMahon said. “Total nonresident gross incomes rose from $125 billion to $222 billion, and their average incomes increased by 16 percent, from $4.3 million to $5 million. How much of that increase consisted of former New York residents who had moved away to escape our tax burden? The data don’t tell us. But the pattern certainly does not indicate that higher rates don’t matter, or that New York can raise “millionaire taxes” with impunity.”
McMahon noted that New York is one of only a dozen states still imposing its own tax on the estates of wealthy residents. “There is little double that as long as we impose our own estate tax, we are providing a strong incentive for wealthy households—including owners of businesses in New York—to sell their assets here and move to any one of the 38 states that will not subject them to added tax,” he said.
Roughly 40 percent of the state’s income tax is generated by the highest-earning one percent of taxpayers, whose incomes are much more volatile and subject to disruption during recessions and stock market downturns, McMahon said, concluding: “Raising taxes on the highest incomes to raise revenues in the short term will only accelerate the erosion of our tax base in the long run, ultimately undermining funding for the very programs the Legislature wants to protect.”
You can read the full testimony here.
The Empire Center, based in Albany, is an independent, not-for-profit, non-partisan think tank dedicated to promoting policies that can make New York a better place to live, work and raise a family.