Over at the New York Times‘s message board, many commenters have reacted to Mayor Bloomberg’s proposal to lay off teachers with some version of: “why not just tax the rich more?”
Well, New York City and State do tax the rich. Anyhow, a chart from Mayor Bloomberg’s full budget (p39 of the PDF) illustrates how a more aggressive strategy to this end would not be practical. You really can tax something out of existence, as New York has proven over the past decade with its cigarette tax.
This year, cigarette taxes will net only $70 million for the city, a far cry from the $160 million that Gotham netted in 2003, when the city and the state both aggressively hiked taxes on cigarettes. Since then, cigarettes have simply gone away, taking their taxes with them.
Take the same aggressive approach to the rich, and the rich will go away, too.