Andrew Cuomo’s proposal to renew ‘millionaires’ tax’ stirs debate in Albany
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New York state Gov. Andrew Cuomo is hoping to keep taxing millionaires.
The state’s “millionaires’ tax” — a higher income tax on earners making $1 million — expires on Dec. 31. But Cuomo has said he believes that keeping the tax longer will help balance the budget.
Not everyone in Albany is in agreement, though. Democrats, who control the State Assembly, want a more progressive tax plan, while conservative groups have said they think the tax won’t do what Cuomo thinks it will.
Cuomo said in a January presentation on the 2018 executive budget that he wants the state to extend the current millionaires’ tax rate and keep it in place for an additional three years.
If New York were to cut the millionaires’ tax, the state would lose more than $4 billion over two years, Cuomo said during the presentation. This loss could be crucial, as the governor intends on cutting taxes for the middle class.
E.J. McMahon, research director for Empire Center for Public Policy, said he believes the debate over the millionaires’ tax has gained the most attention out of the executive budget. However, McMahon also said he does not believe that this proposal deserves full support from the legislature, partly because of the reliance on the tax as a revenue source.
“New York is more dependent than ever on revenues from its personal income tax, which generated nearly two-thirds of total tax revenues in fiscal 2017,” McMahon said.
There are 45,000 taxpayers in New York state who currently fall into this millionaire income bracket. Their incomes are taxed at an 8.82 percent rate for making $1.1 million or more in a year.
Cuomo’s plan to extend the tax rate on millionaires is part of his larger goal to alleviate the tax burden of the middle class. When the current tax rate expires, anyone earning over $300,000 annually would be taxed at the rate of 6.85 percent, including millionaires.
By increasing the tax rate on the millionaires, the middle class could see its tax rates decrease, Cuomo has said. Cutting the tax on the middle class is something that Cuomo promised to do in the state budget presentation.
Some assembly Democrats, though, are working against the governor.
Following the release of Cuomo’s budget, Assembly Speaker Carl Heastie introduced a progressive tax structure, and said he hopes it will “address income inequality and ensure funding for critical services,” according to a report released by Heastie on Jan. 26.
Heastie’s plan would tax those who earn an income from $1 million to $5 million at the current 8.82 percent rate. Those making $5 million to $10 million would see their tax rate increase an additional .5 percent, and those making between $10 million to $100 million would be taxed an additional 1 percent.
If approved, this proposal would generate $5.6 billion in additional revenue while only affecting around 66,000 taxpayers, according to the report.
If the state legislature extends the millionaires’ tax, McMahon said he believes the government would need to raise an additional $683 million in revenue in fiscal year 2018 and $2.7 billion in fiscal year 2019, making the millionaires’ tax insufficient for Cuomo’s plans in the first place. That scenario is if there are no more spending cuts, McMahon added.
If Cuomo puts significant effort into extending the millionaires’ tax rate, though, there is a good chance it will be passed, said Doug Muzzio, a professor at City University of New York Baruch College.
The need for higher taxes in New York state comes down to more government services, Muzzio said.
Richard Auxier, a research associate in the Urban-Brookings Tax Policy Center at the Urban Institute, said New York’s state tax system more resembles a federal income tax, which he said is progressive.
States use the tax system as a way to increase revenue to fund additional programs. Auxier said taxing millionaires could be a good way to make money needed to fund state ventures. He said that each state is responsible for deciding what revenue streams are right for them.
“New York needs a good amount of money and has to get it from somewhere,” Auxier said.
Published on February 21, 2017 at 10:10 pm
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