Mayoral candidate Bill de Blasio has a tax plan that rivals call a political “fantasy.” Its a fiscal dream, too. If de Blasio, the citys elected public advocate, thinks New York can hike taxes on the rich and not suffer for it, he didnt learn much from the 2008 crash. Gotham must become less dependent on the “top 1 percent” to be able to provide services to everyone in a downturn, not more.
De Blasios scheme is this: Hike income taxes by 13.8 percent on New Yorkers making above half a million dollars annually.
Hed use this bounty — $530 million a year — to pay for 38,177 pre-kindergarten students to go to school all day instead a half-day. Hed create 10,000 new pre-K slots, too.
The rest, $188 million, hed spend on older kids after-school activities. After five years, de Blasio would let this tax surcharge lapse, and — he says — find another way to pay.
De Blasios plan has pushed him to frontrunner status in the Democratic primary.
But many voters dont realize: We already spend $24.6 billion a year on education — 52.7 percent more, adjusted for inflation, than we did when Mayor Bloomberg took office nearly 12 years ago.
De Blasios Dem rivals have hit out on the political problem. Former city Comptroller Bill Thompson says its fantasy, because Albany would never agree (the city needs Albanys OK to raise taxes). Quinn points out: De Blasio was against tax hikes just a few years ago. But the bigger danger is fiscal.
In 2009, the top 1 percent of taxpayers (the 34,598 households making above $493,439 annually) paid 43.2 percent of city income taxes (they made 33.9 percent of income), according to the citys Independent Budget Office. Each of these families paid an average $75,477.
No, most people wont up and leave (though if 20 percent did, theyd leave New York with less money than before the tax hike). But they can rearrange their incomes.
Unlike most of us, folks making, say, $10 million have considerable control over how and when they get paid. Thats because much of their money comes from cashing out a partnership, or selling stock or a house or a painting. To avoid a tax hike, its easy enough for them to pay themselves earlier by selling their stuff earlier — before the tax hike.
The city made $800 million in extra taxes last year because rich people sold their stuff before President Obama increased investment taxes in December.
Or, people can pay themselves later — after the five years worth of higher taxes are up. Thats if everything goes well. What if theres another downturn?
In Fiscal Year 2008, before Lehman Brothers collapsed, City Hall collected $8.6 billion in income taxes. By 2009, the figure plummeted to $6.5 billion, widening the deficit by $2.1 billion. More than half a decade later, personal-income taxes are still below that 2008 figure; $8.2 billion is expected this year.
Its been a long, slow climb. But de Blasio doesnt get that things have changed. He says his plan is based on “a similar surcharge implemented between 2003 and 2005” on “earners over $150,000.”
First, people making low six figures have less control over their income and location than top earners. Indeed, the 3,505 families who would provide 37.7 percent of de Blasios new tax revenue have a lot of discretion of how they get paid.
Second, back then, New York was embarking on a record credit bubble. We should have learned something since 2008.
And we should worry that today New York is still missing 19,000 high-paying Wall Street jobs compared to half a decade ago. Its hard to attract new high-paying jobs to replace the old ones when potential entrepreneurs not on Wall Street are singled out for higher taxes. Plus, back then, the federal government was cutting taxes, not raising them — easing the burden for New Yorkers.
If having well-paid government workers look after 4-year-olds is critical, it would be sensible for de Blasio to find a way to pay for it without hiking taxes. Teachers pensions will cost $3.1 billion this year. A 401(k)-style plan for new teachers would be in order.
De Blasios rivals should point out these facts. Instead, Thompson and Quinn said in a recent debate that they wouldnt rule out tax hikes on the wealthy.
By contrast, listen to GOP candidate Joe Lhota. “Talking about raising taxes is about as tone-deaf as you can get,” he said Friday. “Mr. de Blasio seems unfazed by the consequences of taxing people out of our city.”
Original Source: http://www.nypost.com/p/news/opinion/opedcolumnists/the_high_price_of_milking_the_rich_G5sGh0e0DAtnCQE7JcEJxI