Before leaving Albany for the Legislature’s Presidents’ Week recess, Assembly Speaker Carl Heastie tweeted up a storm in support of a new soak-the-rich tax hike proposal backed by most of his fellow Assembly Democrats.
In the process, he trotted out some familiar myths and misleadingly incomplete data to support the claim that wealthy New Yorkers don’t pay their “fair share” of state income taxes.
The speaker supports a bill that would permanently extend what amounts to a 29 percent surtax on all taxable income (starting on the first dollar) earned by singles at the $1 million-and-above level and married couples with incomes of $2 million or more. A temporary higher bracket of 8.82 percent is due to expire at the end of 2017, returning the state’s top rate to the 6.85 percent level established under permanent law back in 1997. Also due to expire: temporary rate brackets offering smaller marginal cuts of 0.2 to 0.4 percent for millions of households earning less than $300,000.
Heastie’s proposal also would impose two new higher rates, of 9.32 and 9.82 percent, on incomes starting at $5 million and $10 million, respectively, while shaving a small additional amount off the marginal rate for filers earning under $150,000 and expanding the state Earned Income Tax Credit, or EITC.
Broad-based tax cuts are generally a good idea, but further jacking up the top rate would make New York even less competitive than it already is, as illustrated by the latest Tax Foundation map of state rates. For affected tax filers living in New York City, this would take the top rate on super-high income earners to 13.7 percent, highest in the country.
The Assembly proposal would raise a net $1 billion in revenue, according to the speaker. Not surprisingly, it has been embraced by advocacy groups allied with or financed by teachers’ unions, which are backing demands for a school aid increase more than double the already nearly $1 billion, 4 percent increase Governor Andrew Cuomo has proposed in his budget.
The tenor of Heastie’s arguments is pretty much summed up by a couple of his many tweets on the subject:
In other words, you are invited to assume that New York (a) relies on the poor and middle class as heavily as the wealthiest taxpayers, and (b) just doesn’t ask the top 1 percent of earners to kick in an amount of taxes commensurate with their income.
The reality: according to Cuomo’s FY 2017 Executive Budget, the highest earning 1 percent (with estimated income starting at slightly less than $1 million) are estimated to have paid 42 percent of the state personal income tax in 2015. Tightening the focus a bit, those earning at least $1 million or more (the top 0.6 percent of all filers) are expected to account for 27 percent of total adjusted gross income while paying 40 percent of the income tax revenue this year, budget documents show. Meanwhile, the 83 percent of New York tax filers who have incomes below $100,000 will generate just 15 percent of income taxes while earning 31 percent of total adjusted gross income.
The top 1 percent’s tax share has grown significantly since the current governor’s father left office in 1994, as shown in the chart below. That’s due only in part to the relative growth in their incomes, however. The wealthy’s share was also boosted by Governor George Pataki’s 1995 income tax cut, which reserved much larger savings for middle-income households, thus shifting more of the remaining burden to filers at higher income levels.
By national standards, New York’s income tax is very light on low-income households, most of whom not only pay zero taxes but get net refunds from the state. In fact, past comparisons of state income taxes by left-leaning analysts labeled New York one of the nation’s most progressive tax systems even before the supposedly temporary millionaire tax first took effect.
The Assembly’s proposal to boost the EITC is both a good and affordable idea, for reasons explained in our new report on the tax credit. In fact, the state could expand the credit by twice as much as Heastie has proposed at a net cost well below the $400 million it hands out annually in the form of production credits to (mostly) very wealthy people in the entertainment industry.
Incidentally, Heastie’s “#fairshare” social media outbursts Tuesday also implied at several points that data on income distributions and income taxes are available for 2015. In fact, the 2015 tax filing season isn’t even over yet, and the state Department of Taxation and Finance has not yet released data for 2014.