Working Families Party Executive Director Dan Cantor argues the merits of raising taxes on millionaires to help close New York’s budget gap in an op-ed today in the Daily News:
To help stop budget bleeding, raise taxes on the rich
By Dan Cantor
Wednesday, November 19th 2008, 4:00 AM
Tuesday, legislative leaders balked at passing Gov. Paterson’s proposed $5.2 billion in spending reductions, which would have included deep cuts to health care and education.
They’re getting criticized for their inaction, but given the governor’s proposals, their restraint may have been warranted. That’s because Paterson’s plan asks everyone – schoolchildren, local property taxpayers, students at SUNY and CUNY, the elderly and New Yorkers with disabilities – to sacrifice.
Everyone, that is, except the wealthy New Yorkers and the Wall Street barons who got us into this mess in the first place.
Yes, prudent spending cuts in state spending are a necessity – that much is undeniable. But so far, the governor is asking working families to shoulder the entire burden of the budget deficit alone, while taking any income tax increase on New York’s many millionaires off the table.
That is not acceptable. Not after the richest New Yorkers have seen billions in tax cuts that have slashed their income tax burden in half over the last 40 years. Not when asking those who can most afford to contribute a little more in taxes could easily prevent many of the most painful cuts being talked about in Albany.
Opponents of a tax on millionaires repeat the mantra that asking the wealthy to pay a modest increase in income taxes would drive them out of the state. But all the evidence and recent experience says that simply isn’t so.
In 2003, following the economic downturn caused by the 9/11 attacks, the national recession and the burst of the dot-com bubble, New York relied on modest increases in income tax rates on the wealthy to help close its budget gap. The state employed a temporary top rate of 7.25% for single filers with incomes over $100,000 and 7.7% on income over $500,000.
The rich did not leave the state. Instead, the economy rebounded and the number of high income New Yorkers continued to grow.
In 2004, New Jersey raised its income tax on those making over $500,000 a year by 2.6 percentage points. Despite dire predictions, a recent study from Princeton University found that while the half-millionaire’s tax helped the Garden State raise billions in needed revenue, it caused almost no tax flight. (The study did find however, that high local property taxes – a very likely side effect of Gov. Paterson’s proposed cuts in education and aid to localities – were responsible for driving out thousands of middle-class families).
As Nobel-prize winning economist Joseph Stiglitz wrote in a letter to Albany leaders, “Increases on higher-income families are the least damaging mechanism for closing state fiscal deficits in the short run. Reductions in government spending on goods and services, or reductions in transfer payments to lower-income families, are likely to be more damaging to the economy in the short run than tax increases focused on higher-income families.”
Those are wise words state leaders can’t afford to ignore. In the months ahead, Albany will have no choice but to meet the budget deficit head-on.
So enough of the bluffing and blame-mongering. Serious times demand a serious approach to getting our state back on track.
What is needed to solve the budget crisis – and it is solvable – is a plan that calls for true shared sacrifice. Sensible spending cuts, yes – but also a commitment to asking the New Yorkers who can most easily afford to do so to pay their fair share in taxes.
It is a formula that has worked before. The well-being of millions of working families and the health of critical public investments demand that we use it again.
Cantor is executive director of the Working Families Party.