At Wednesday’s Democratic debate, Mayor Bill de Blasio promised that when he is president — ha! — “we will tax the hell out of the wealthy.” It’s New York, though, that is the tax hellscape. Not so much for the super-rich, who can make a rational decision whether to pay high taxes or leave, but for middle-class and working-class folks who are stuck here.
Hizzoner ran for his first term promising a tax hike on the 1 percent, yes, but Gov. Andrew Cuomo wouldn’t let him, hardly a great sign that a President de Blasio could get Congress to agree. Nope, New York’s income taxes were high, and progressive, before de Blasio. The top city rate — nearly 3.9 percent of income, plus state and federal taxes of between 44 and 46 percent — applies to people making more than half a million dollars a year.
People paying this top rate — about 61,500 households — paid just more than half of the Big Apple’s income taxes in 2015, or close to $5.6 billion, according to city data. Households making more than $10 million — “only” 1,400 — paid 17 percent of the city’s income taxes in 2016.
Though de Blasio couldn’t further “tax the hell” out of the rich, tax revenues have soared. In 2013, the year he was elected, Gotham took in $9.2 billion in personal-income taxes. This year, it expects to take in $13.4 billion, up one-third after inflation.
That’s because, contrary to the mayor’s rhetoric for national audiences, de Blasio’s goal isn’t to reduce inequality but to monetize it. New York couldn’t spend what it spends without massive disparities.
In fact, it can barely spend what it spends with massive disparities. New York will spend $73 billion in local taxpayer resources this year — only about 4 percent of it directly from those top-income earners.
Where does the rest come from? There’s the balance of that income-tax money: People making between $50,000 and $150,000 must pay 25 percent of the city’s income taxes, when most American localities don’t levy such extra burdens on the middle class in addition to federal and state rates.
The city also will get about $8.3 billion from its sales tax. Even with an exemption for clothing under $110, it’s an imperfectly regressive tax. The nearly 8.9 percent rate, half city and half state, applies the same to a Bronx supermarket clerk buying books for her kid as it does to a multimillionaire having a MacBook shipped to his Soho loft.
The city’s property tax will bring in $29.6 billion this year, the biggest tax. But New York’s system of assessing property is inconsistent, with owners of multiple investment properties — including de Blasio — often paying lower rates than people with modest incomes who own one property. (Renters, too, pay a big indirect rate.)
As Comptroller Scott Stringer noted last year, “households making less than $50,000 have seen their property-tax burdens nearly double” since 2005, even as their income has declined; people earning between $50,000 and $100,000 have also seen “their burdens almost double . . . as growth in property taxes has far outpaced income growth.”
People making between $250,000 and $500,000, by contrast, saw “the lowest growth in tax burdens and also have the lowest overall burden of any income group.”
De Blasio’s primary voters in the Midwest — er, make that, voter — might wonder at a mayor who presides over a tax system that hits poor and middle-class people hard, because even ultra-progressive taxes can’t cover his big spending.
De Blasio doesn’t matter much to New York anymore, but his failure to garner national interest may serve as a lesson for would-be successors.
Profane threats to tax rich people aren’t working. New York’s next mayor may think of more constructive approaches.
A good start would be doubling the sales-tax exemption on clothing, which hasn’t kept up with inflation, and creating exemptions for people buying books, computers and other educational and day-to-day items.
The city needs to redesign its property-tax system from scratch, favoring full-time occupied housing — whether rented or owned by the occupant — for the workforce.
Meanwhile, the mayor had better hope a recession doesn’t do his job for him in making New York “fairer.” The last recession cost the city billions as the wealthiest saw their volatile income plummet, with everyone else having to make up for it in higher taxes and poorer services.
This piece originally appeared at the New York Post
Photo by Scott Olson/Getty Images