(The Center Square) – New York Democrats who control the state Legislature have resurrected a plan to impose a wealth tax on the state’s top earners as part of their annual budget proposal.
Legislative leaders rolled out the so-called one-house budget plans earlier this week, which kicked off negotiations with Gov. Kathy Hochul on a new spending plan ahead of the state’s April 1 budget deadline.
Democrats in the state Senate and Assembly proposed raising personal income taxes by half a percent for people earning over $5 million until 2027, which could add an estimated $1 billion a year in additional revenue. Backers of the plan say New York’s top earners pay insufficient taxes to the state and argue that they should be required to pay more than the state’s flat 6.5% personal income tax rate.
The Citizens Budget Commission, New York’s nonpartisan fiscal watchdog, criticized the revival of tax proposals in the budget, saying it would “weaken New York’s already precarious competitive position.”
“Tempering spending growth, holding the line on taxes, and boosting housing production are critical to New York’s fiscal stability and our value proposition as a great place to live, run a business, and raise a family,” Andrew Rein, the commission’s president, said in a statement. “These should be the priorities as New York State’s leaders negotiate the final budget.”
Hochul, a Democrat, didn’t call for raising taxes in her executive budget proposal and has rejected previous efforts to impose higher taxes on the state’s wealthiest. She told reporters earlier this week that raising taxes is a “non-starter” in the budget negotiations.
The governor unveiled her $233 billion spending plan in January, which called for major investments in mental health and public safety and $2.4 billion to address the migrant crisis in New York City.
New York is facing a projected $4 billion deficit in the next fiscal year’s budget, with economists suggesting the revenue shortfalls will result in cuts to programs and services.
In 2021, then-Gov. Andrew Cuomo raised the state’s tax rates on some of the wealthiest New Yorkers. Residents earning between $5 million and $25 million are now taxed at 10.3%, and those making over $25 million are taxed at 10.9%. New York City residents with income over those thresholds pay between 13.5% and 14.8%, including the city’s 3.88% top income-tax rate.
Critics say the higher rates have driven wealthy New Yorkers out of the state. An analysis released last year by New York City’s Independent Budget Office found the number of taxpayers who earned between $1 million and $5 million declined 11% in 2020 from the prior year as the top earners fled for other states.
A 2023 Tax Foundation report cautioned New York and other states against taxing the rich to drum up money, saying it would undercut investment and drive entrepreneurs and innovators away.
A recent poll by Siena College found that New Yorkers overwhelmingly support higher taxes on the state’s top earners.
On Monday, President Joe Biden unveiled a federal budget proposal for $5 trillion in additional taxes on corporations and high earners over the next decade. The plan, which is subject to congressional approval, includes raising the corporate tax rate to 28% from 21%, which is the level that was set by the 2017 Tax Cuts and Jobs Act under then-President Donald Trump.
Biden wants to raise the tax rate on capital gains, such as stock sales for individuals earning more than $400,000 to 39.6%, and impose a 25% “billionaire tax” on individuals with more than $100 million assets.
