Willie Sutton was famously asked why he robbed banks. His answer was illuminating: Because that’s where the money is. And that lesson has been taken to heart by New York City’s new Democratic Socialist Mayor, Zohran Mamdani, whose plan to fund his initiatives and close the budget gap is to tax the rich. Why? Because that’s where the money is.
State lawmakers in New York are considering several proposals to tax the rich, including a tax on luxury second homes and changes to a tax credit favored by the wealthy.
Mayor Zohran Mamdani’s preferred option — raising personal income taxes for millionaires — has support in the State Assembly and Senate, and is backed by more than 60 percent of New York City voters. But Gov. Kathy Hochul firmly opposes the idea.
For the egalitarian, the propriety of taxing the rich is obvious. They can afford it. Their good fortune, rather than sacrifice and effort, is the primary root of their wealth. Others are suffering for lack of funds and critical resources, so why shouldn’t the wealthy pony up a bit more so that life can be better for “everyone”?
The mayor’s plan is simple: increase the city income tax rate by two percentage points for those who earn $1 million per year or more, from 3.88 percent to 5.88 percent — the equivalent of a 51 percent increase. Doing so could raise an additional $3 billion in revenue annually.
A household that earns $1 million per year would pay $20,000 more in city taxes, while one earning $10 million per year would pay $200,000 more. The plan would affect about 34,000 households, a group that is small but important to the city budget.
What remains unspoken is that the wealthy, assuming you consider a million per year wealthy in New York, already pay far more than their share of the cost of running the Big Apple, paying 37% of NYC tax revenue. There are a lot of people in the city who fall below the income tax threshold, and somebody has to pay for their use of city facilities.
But there remain two questions. First, will it work? Taxes in New York are extremely high, closing in on confiscatory, and yet they aren’t enough to cover the ever-increasing nut. Raising taxes would be one thing if spending was either cut or, at the very least, remained the same. But neither New York history nor tradition suggests that’s going to happen. What seem far more likely is that taxes are raised, filling one gap, only to have new initiatives create the next gap requiring . . . more taxes! And wealthy New Yorkers know something about taxes.
New York City already has the nation’s highest income taxes for the highest earners, with households that make more than $25 million per year paying a combined state and city rate of 14.78 percent. Some experts worry about the effects of raising taxes further.
Second, if taxes increase, will the wealthy reach their breaking point and call it quits? Will they move outside the city? Will they sell their pied-a-terre? While the city still offers many advantages in terms of food and culture, one can always visit and only pay the cost of a good meal, a museum donation and a Broadway show. But what of the other exodus?
Mr. Mamdani, a democratic socialist, has argued that millionaires can afford to pay more to improve New Yorkers’ quality of life. He said recently that he was more concerned about struggling families leaving the city because they could not afford to stay than he was about the possibility that rich New Yorkers would depart.
“For all of that conversation about this imagined exodus, we have to reckon with the very real exodus that we are seeing in this city: an exodus of working-class people,” Mr. Mamdani said.
He’s got a point. All the very expensive, very fancy, very enjoyable aspects of city life rely on workers who do the heavy lifting. Think of a restaurant without servers. That would suck, and those servers have to live somewhere, need daycare for their kids, need public transportation to get to work and need food because they’re human beings. If the wealthy want to enjoy the efforts of the working class, they need to do their part to keep the working class in New York. If the poor are priced out of the city, who will drive their limos to the Met Gala?
Is raising taxes, whether on income, second (or fifth) homes or both, the solution to New York City’s affordability woes, or is it the straw that breaks the city’s back? If it happens, will this be the end of it or the start of the next round of dreamworks? And much as there are few advocates for the poor, downtrodden wealthy, is there anything wrong with accumulating wealth and wanting to keep it? It’s no crime to be poor, but it’s no great honor either. Why pick on the wealthy for having managed, whether by effort or good fortune, to succeed? Isn’t that the American dream?
*Tuesday Talk rules apply.
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Robert Heinlein.
“The power to tax, once conceded, has no limits; it continues until it destroys.”
Not posting images or links because rules, but that’s not true, much as I like Heinlein.
*Tuesday Talk rules apply. E.g., https://politics.stackexchange.com/questions/38945/is-there-any-document-letter-quote-linked-to-the-founding-fathers-that-indica
I can see the appeal of this. If you own an apartment that is your second (plus) home and it has a $5M valuation, you are rich. Second, if this is your out of town home, you are not a local voter. Taxing rich non vters is about as good as it gets for an elected official. To be sure, this tax is bad for current holders of these homes. My back of the envelope estimate is that it will depress valuations ~ 25% (hard to say exactly because amount of surcharge was not announced, but revenue projections suggest about 60K/year per flat). Yet once the price adjusts downward such that the carrying costs equilibrate to current levels (and that’s what theory predicts), subsequent buyers will be indifferent to the prospect of paying X as a tax or an opportunity cost on capital. That is, this tax s/b fully capitalized into the sale price and if so, the burden falls entirely on current owners at the moment of enactment. It’s a one-time wealth transfer dressed up as an annual tax. (Wealth taxes don’t work as well if capital is mobile, as we should remind Californians, but it’s hard to offshore your second home…though climate change might ‘offshore’ some real estate in Miami, I hear.)
I doubt economic theory is very accurate about transactions propelled by emotion.
In general, you don’t get to own $5m second homes by being an impetuous type, executing transactions propelled by emotion. On the other hand, such a person might take seemingly rash steps, to send signals (eg, E Musk moving companies out of Delaware). But along with what you are saying, this plan may have a giant effect on the market serving people who might be more emotional–eg, the retired dentist thinking about a $2m condo, who would be right to worry about the ever expanding definition of “rich”. (I can’t believe I am old enough to remember when the khmer rouge executed people who were rich enough to buy reading glasses, so maybe this dentist is not being excessively emotional)
Crap, it was “billionaires,” and now it’s down to “millionaires” already. Just have everybody who actually owns anything give half of it to the city, and if they don’t like it, they can leave. Then there will be all kinds of money for the city to spend.
“The problem with socialism is that you eventually run out of other people’s money.” – Margaret Thatcher.
While taxing “the rich” may be a very clever plan it depends on the rich staying to be taxed. There are examples of wealthy individuals leaving in response to perceived high taxation, and a pied a terre is a lot more disposable than a primary residence. In the case of New York some may decide a luxury hotel suite is cheaper than a luxury condo, or New Jersey is not so bad. The concern is that the definition of “rich” will ratchet downward until everyone not on welfare is a kulak.
[Ed. Note. New Jersey is still that bad.]
Let me get out the writings of our founding fathers that I’ve been told to re-read for the sake of originalism and see what they have to say about hoarding obscene wealth and the dangers of concentrated power and inheritance taxes. Oh. Oh, no. Rich people. You are not going to like these parts. Better hush up about them and never speak of those parts of our history again.
Jefferson, one would surely expect, but John Adams and Madison and Webster and Paine and Franklin and nearly all of them in one way or another too? Um, we’re doing this American experiment thing incorrectly according to them who had no conception of the term or practice of newfangled “originalism.” Read what they said about the wrongness of collecting too much money as penance.
Repeat a tenth of what they said with sincerity and you’ll be called a dirty commie and pilloried by more sensible folk than our founding fathers. Accumulating wealth being the American dream? Our education system has fucking sucked for a lot longer than I expected. Picking on aristocrats of all their stripes was indeed the American dream upon which we were founded.
The rule being proposed is clear and simple, so what could possibly, go wrong?
All things being equal, I may not have an issue with such a rule. At the end of the day, those on the highest end of the scale make money using roads, and services paid for by everyone and it’s not out of line to expect that they should pay for those services.
But (not to get too far into the weeds), our codes have become so convoluted that when you look at the extremes, the amount one makes in “salary” is impossible to quantify. If you are paid in options and someone leverages assets against the options, followed by deductions claimed for loan interest, what’s your base salary? It’s going to be a fool’s errand to determine what their “salary” is for the year and the rule is going to hit all the wrong people.
Of course, no one making these rules understands econcomics, so when it doesn’t bring in all the revenue needed for heaven on earth, they’ll presume that the rule didn’t go far enough.
Last one out, shut the lights, please.
Tax the rich
Feed the poor
‘Till there are no rich no more……..
https://www.youtube.com/results?search_query=ten+years+after+i%27d+love+to+change+the+world