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?
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