Time and time again, the Democrats turn to higher tax rates, particularly on the wealthy, as a means of making things better somehow. At times it may appear to be virtue signaling to say that those who are rich should “pay their fair share” even when they pay most of the taxes already.
Now New York is showing, yet again, that a progressive income tax system that really is about redistributing wealth and punishing the rich will eventually implode. The rich will simply move themselves, their assets, and their capital elsewhere.
Democratic governor Andrew Cuomo announced that New York state’s income tax revenue had taken a nosedive after he introduced his new budget plan a month ago, according to the New York Post. The hit taken by the state is a whopping $2.3 billion.
The governor did also note that they have a plan to adjust for the sharp decline in income tax-generated revenue: Spending will be accordingly decreased.
“That’s a $2.3 billion drop in revenues. That’s as serious as a heart attack,” he said.
“This is worse than we had anticipated. This reduction must be addressed in this year’s budget,” Cuomo added.
During his address in Albany, Cuomo took a bit of a former presidential candidate’s approach in explaining how the revenue shortfall came about: It didn’t appear to be his fault but instead seemed like the fault of everyone and everything else.
He blamed President Donald Trump’s new federal tax code. He argued that it specifically benefited some states and hurt others, according to Bloomberg.
“It was politically diabolical and also highly effective. And if your goal is to help Republican states and hurt Democratic states this is the way to do it,” he said.
He also blamed the wealthy for leaving the high-tax state, as the rich seeking lower income taxes was creating a revenue problem.
“They are investors, they have accountants, they are making informed decisions. This is going to be the tipping point and people will now be making a geographical change,” he said.
However, in his slap at the rich leaving, he also made an admission which, to some, might be quite shocking.
“If even a small number of high-income taxpayers leave, it has a great effect on this tax base. You are relying on a very small number of people for the vast amount of your tax dollars,” he said.
Yes, he admitted that the small number of wealthy people in the state, who are being taxed at the highest rate, are making up the majority of the tax revenue. That hardly seems like them paying their “fair share,” now does it?
And it gets better. He also got more specific, pointing out that 46 percent, which is almost half, of the state’s income tax revenue is paid by the top one percent of earners.
To his credit, Cuomo pointed out that raising taxes further on the wealthy was not the answer. He acknowledged that would send more packing.
“Tax the rich, tax the rich, tax the rich — and then the rich leave. And then what do you do?” he said.
But then he didn’t seem to get the correlation between lower tax rates and higher revenue. He seemed to be stuck on lower taxes being a bad thing as he continued.
“It would be the absolute worst thing to do right now. At the same time, you don’t have the ability to reduce taxes on the rich because that would just expand the shortfall,” he said.
Cuomo acknowledged the importance of keeping the rich in the state. “God forbid if the rich leave,” he said, according to the Post.
Under Trump’s lower federal income tax plan, revenue increased by nine percent in 2018, reported Investor’s Business Daily. As of July 2018, despite the lower income tax withholding schedules not taking effect until February, revenue for the first half of the year was higher than that of the previous year.
The nonpartisan Congressional Budget Office reported that in the first half of 2018 federal income tax revenues were $76 billion higher than in the same time period for 2017. So even though taxes were lower, revenue went up.
While he blames Trump’s tax plan, that same tax plan is bringing in higher revenue with lower taxes. Perhaps Cuomo needs to rethink his position on reducing taxes on the rich if he wants them to stay in New York.