Gotham Gazette Sun, 17 Jan 2021 02:48:49 +0000 Joomla! - Open Source Content Management en-gb (Webmaster) The ‘Mansion Tax,’ a Smart Step Toward Fairness seniors during de blasio visit

Seniors (photo: Michael Appleton/Mayor's Office)

I grew up around some common stereotypes of New York City wealth: private schools, trust fund kids, and expensive Manhattan real estate. But as a New Yorker with family here going back to the late 1800s, I am aware that most of the people in our city do not have such luxuries. That’s why I support the “mansion tax” being championed by Mayor de Blasio and state Assembly Democrats and want to see it passed as part of the state budget in Albany this week.

Due to income inequality, gentrification, and inadequate Social Security benefits, among other factors, 19 percent of seniors in New York City live in poverty, according to City Limits. Seniors will constitute over a fifth of all New Yorkers in the next decade. Funds from the mansion tax, a 2.5% tax on sales of New York City property above $2 million, would go to rent subsidies for low-income seniors in New York City.

My family isn’t top 1% or even top 5% rich, but we have owned a large apartment on Riverside Drive since the early 1990s. If we sell and buy another apartment of similar value, we would pay the mansion tax, as would the buyer of our apartment. The people I grew up with -- those who can afford, or may inherit, homes worth over $2 million -- can afford to pay this tax. But taxes shouldn’t be levied simply because people can afford to pay them.

Because of the high costs of living in New York, many people with real estate worth over $2 million do not “feel” wealthy. Thankfully, taxes are about how wealthy you are, not how wealthy you feel. A better reason for taxes on wealth is that those with valuable property in our city have benefited from policies that have worked to purposefully increase our property values since the fiscal collapse of the mid 1970s. Taxes aren’t charity: we are returning to our city a portion of the success that we owe back to it -- and who better to benefit from this than seniors who don’t have a lot to live on? Local politics and policy have benefitted homeowners in New York City, while decades of national policies have left behind millions and hollowed out the middle class.

As economic historian Adam Tooze notes, “The fact that pre-tax incomes for the least favored half of American’s citizens have not risen, but have fallen slightly over the last forty years ought to be a show stopper. Literally, all other policy discourse should surely cease.” Read that again. The poorest half of the U.S. have experienced no real income gains in forty years. There are broad structural issues with our politics and economy that are driving stagnant incomes and the racial wealth gap. Addressing them requires transformational changes. The mansion tax is one small step in that direction that New York City can and should take, and will with approval in Albany.

Another point in this debate focuses on the hard work of the wealthy: that they have earned their accumulated benefits. This isn’t the full story. I was raised in a social environment that encouraged overwhelmingly white children to identify as “upper-middle class” rather than confront the realities of our wealth and class. Since then, I’ve been pushed to learn that hard work isn’t the only ingredient in my family’s prosperity. In addition to hard work of my forebears, the engine of 20th century prosperity was built on racialized social and economic policy that proactively furthered the opportunities and wealth of white families while systematically excluding families and communities of color. The result of these policies are now are often referred to as the racial wealth gap.

My family’s wealth serves to protect our comforts and privileges at the expense of our neighbors. This is precisely what opposing the mansion tax achieves: one real estate official called this tax “DOA” in Albany, while Manhattan Borough President Brewer and Governor Cuomo, both Democrats, oppose it. That’s their choice, but don’t do it on our account: not all of the wealthy want to raid the commons in order to keep more for ourselves. My family and many others like us support the mansion tax because we support New York City and know paying our fair share of taxes is necessary for its long-term vitality. This includes the safety and well-being of our seniors.

For a generation of young people who may inherit or be fortunate enough to purchase a house or apartment in New York City, issues like the mansion tax should not be an obscure policy matter declared DOA by the real estate lobby. New York City should do what it can to promote fairness and equity in our society, and Albany should agree. Wealthy people, especially young people with high incomes or inherited wealth need to push ourselves and each other to reframe the debate. Those with wealth, even the rich who do not “feel” rich, must pay more to keep New York City livable for everyone.

Evan Casper-Futterman is a PhD Candidate in Urban Planning and Public Policy at Rutgers University and is an adjunct instructor at several CUNY campuses. He is a member of Resource Generation, a national membership-based organization that organizes young people with wealth for the equitable distribution of wealth, land, and power.

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The ‘Mansion Tax,’ a Smart Step Toward Fairness Sun, 26 Mar 2017 04:00:00 +0000
Budget Watchdogs Question De Blasio’s 'Mansion Tax' de blasio mansion tax

De Blasio pitches his mansion tax (photo: Michael Appleton/Mayor's Office)

Budget watchdogs have expressed concern that Mayor Bill de Blasio’s “mansion tax” proposal, which would impose levies on real estate transactions above $2 million, may be misguided or even unnecessary.

De Blasio made a last-minute trip to Albany on Wednesday to rally with Democratic lawmakers and progressive advocates in favor of a number of proposals currently being considered in state budget negotiations. The mayor’s chief concern, however, was the mansion tax, a proposal he has floated for years and revived this budget season as a tool to subsidize affordable housing for seniors.

The proposal would impose a 2.5 percent tax on buyers who purchase property in the city at more than $2 million, raising an estimated $336 million next year, according to the mayor. That funding would then be used for a new Elder Rent Assistance program to provide $1,300 in monthly assistance to 25,000 seniors, the mayor said at his State of the City speech in February. In order to implement the tax, the city needs state approval, which is unlikely given opposition to new taxes from the Republican majority in the state Senate as well as Governor Andrew Cuomo, a Democrat who is fiscally moderate and habitually opposed to de Blasio proposals.

The Wednesday rally at the state Capitol was one stop in something of a barnstorm by de Blasio, who has been pushing the mansion tax plan among seniors, including at two senior center stops on Thursday. The mayor has cited the necessity of the tax revenue to provide the additional rent subsidies to older New Yorkers who fit certain age and income guidelines.

[Related: In Albany, De Blasio and Democrats Push ‘Mansion Tax’]

But fiscal experts question whether the city really needs a new tax to raise that revenue and, if so, whether a transactional tax is the best way to do it.

“This could be a good idea in the context of general property tax reform and other tax reform,” said Nicole Gelinas, senior fellow at the Manhattan Institute, a conservative think tank. “But it's not a good idea as a revenue raiser."

Gelinas noted that the city already charges a mortgage tax, which she called “a tax on people who can't pay cash for an apartment.” “If we wanted to have a more progressive tax on just the purchase of more expensive properties, the money should go to reducing or eliminating mortgage taxes or other property taxes," she added.

That’s not what the mayor is proposing. Instead, Gelinas pointed out, de Blasio is attempting to raise revenue for a new program through a new tax, something mayors don’t usually do unless they face a sharp revenue crunch. “The city is not exactly starved for revenue right now,” she said.

Although the city is feeling the early effects of an economic slowdown, revenues and reserves are still robust after years of sustained growth. Available monies could be used to prioritize affordable senior housing, Gelinas said. Yet, as he once did with his universal pre-kindergarten program, de Blasio is insisting that the way to fund his senior assistance program is through a new tax.

The mansion tax also faces opposition at home from allies of de Blasio. Manhattan Borough President Gale Brewer told Gotham Gazette that she opposes the $2 million threshold for the tax since it would have an outsize impact in Manhattan, where property prices are far greater than the other boroughs. She would prefer a $5 million threshold. “Manhattan should not be the cash cow for the rest of the boroughs,” she said last month.

A report by the nonpartisan Independent Budget Office, prompted by Brewer, looked at property sales from the last three years and found that between 2014 and 2016, 8 percent of homes sold citywide were priced at $2 million or more. Of those, 86 percent were in Manhattan.

[Related: De Blasio Faces Local Questions About ‘Mansion Tax’ Plan]

In response, the de Blasio administration points out that it is a “marginal tax for incremental sales price over $2 million,” meaning that only the price above the $2 million would be taxed at the 2.5 percent. Those purchasing homes closer to the $2 million threshold would be paying very little in added tax.

There are also concerns among the real estate industry about the proposal’s effect on sales, at a time when Brooklyn brownstones can cross the $2 million threshold. The de Blasio administration dismisses that concern due to the incremental nature of the tax.

Carol Kellerman, president of the nonpartisan Citizens Budget Commission, believes the mayor hasn’t made a clear case for the mansion tax. “If the goal is to impose higher taxes on people perceived to be wealthy, there are ways to do it through the income tax structure,” she said in a phone interview. “The mayor’s not proposing this as a form of budget relief or as necessary for budget needs.”

Kellerman also emphasized the “volatile” nature of a transactional tax, which would depend on the ups and downs of the real estate industry and also have a “distortive impact” on the market and change behavior. “If there’s a need to raise that amount of revenue, a transfer tax of this nature is not a reliable source of revenue,” she said.

She also pointed out that the mayor has already allocated billions in the city’s capital plan for affordable housing, so the need for a separate tax for senior housing doesn’t necessarily pass muster.

Given opposition from state Senate Republicans, the mansion tax may be dead on arrival in Albany. De Blasio has argued, including in Albany Wednesday, that he’s heard that before about proposals, such as the $15 minimum wage. Gelinas was blunt about mansion tax prospects. "I don't think it's going to go anywhere," she said.

A spokesperson for the de Blasio administration refuted both Gelinas and Kellerman’s concerns, stressing that property tax reform is a larger undertaking and that the mansion tax is necessary when considering how the proposed federal budget will impact affordable housing and seniors in particular.

The spokesperson also pointed out New York’s existing state mansion tax, which is 1 percent for properties above $1 million, and cited jurisdictions around the world that have used similar taxes to fund policy goals from rising housing markets.

A spokesperson for another budget watchdog, city Comptroller Scott Stringer, declined to comment on the mansion tax proposal. The comptroller has not released any fiscal analysis of the proposal.

At the Wednesday rally in Albany, de Blasio reiterated the need for the mansion tax. “Here’s the bottom line, right now, there are seniors struggling to get by in New York City and all over New York State,” he said. “There are seniors struggling to get by because so many of them are on fixed incomes. So many of them don’t have a way to get more income but the cost of housing keeps going up...We owe it to them to get it right, and asking the wealthy to pay their fair share so our seniors can have decent life is a thing we call common sense.”

by Samar Khurshid, senior reporter, Gotham Gazette

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Budget Watchdogs Question De Blasio’s 'Mansion Tax' Thu, 23 Mar 2017 04:00:00 +0000
In Albany, De Blasio and Democrats Push ‘Mansion Tax’ bdb albany mansion tax rally rachel 

De Blasio in Albany (photo: Rachel Silberstein/Gotham Gazette)

Mayor Bill de Blasio journeyed to Albany Wednesday to rally with Democratic legislators and activists for the extension of the “millionaires’ tax,” set to expire this year, as well as the “mansion tax,” a proposal the mayor has been pushing since 2015. De Blasio and his allies called for both to be part of the new state budget due by April 1.

Citing the threats of deep federal budget cuts from President Donald Trump’s administration and a Republican Congress and the likelihood of tax cuts for the wealthy, de Blasio struck a populist tone as he pushed for the two taxes. The millionaires’ tax would continue across the state and is being backed strongly by Governor Andrew Cuomo, while the mansion tax would only apply to New York City: an additional 2.5 percent marginal tax paid by the buyers of homes valued at $2 million or more, the revenue from which would directly fund rental subsidies for up to 25,000 seniors in New York City. Cuomo has not given a clear position on the mansion tax.

When he spoke from the steps of the State Capitol’s historic “Million Dollar Staircase,” de Blasio was flanked by Assembly Speaker Carl Heastie and Senate Minority Leader Andrea Stewart-Cousins and surrounded by dozens of Democratic lawmakers and advocates. The mayor said that the 2016 presidential election centered around issues of income inequality and the plight of the working class. However, he noted, the young Trump administration has responded with proposed tax cuts for the wealthy, corporations, and insurance companies.

“There is an anger in this country and anger in this state as people feel they are being lied to. They thought they were going to get some relief from their economic distress,” said de Blasio. “What they are finding is quite the opposite, that the rich are getting richer.”

Funds generated by the mansion tax, which has a steep road to passage through the Republican-controlled state Senate, would be earmarked for seniors 62-years-old and older who earn less than $50,000 per year. Citing recent sales data, the de Blasio administration says the policy would affect the top 4,500 residential real estate transactions in the upcoming year and generate approximately $336 million in 2018.

The millionaires’ tax requires anyone earning more than $2.1 million a year to pay a state rate of 8.82 percent, rather than 6.85 percent, as is the rate for those making $40,000 per year. Gov. Cuomo has included a three-year extension of the sunsetting tax in his executive budget. In their one-house budget resolutions, the two legislative majorities took very different stances on the millionaires’ tax. Senate Republicans want to see the tax expire.

The Assembly majority on the other hand, proposes an expansion of the current millionaires’ tax with additional tax brackets for the mega wealthy who earn more than $5 million, $10 million, and $100 million a year. The Assembly budget resolution also included the mansion tax that de Blasio wants, with the chamber’s bill sponsored by Brooklyn Assemblymember Steven Cymbrowitz, who chairs the housing committee.

Speaker Heastie called the tax plan “fiscally and socially responsible.” "A tax for New York City’s highest earners to help fund critical services like education, healthcare, and infrastructure,” Heastie said, “is more important than ever as we are starting to see the true devastating effects of the radical leadership in our new federal government.”

Cuomo, who wields significant influence in the deliberations over the state budget, made no mention of the mansion tax in his executive budget plan, and though he wants to extend the millionaires’ tax, he has expressed concern that expanding it as the Assembly has proposed could drive New York City’s wealthiest from the city.

“People will take a certain amount of abuse and then there is a point,” Cuomo said during a meeting with the New York Daily News editorial board. “The question is, what is that point? Nobody knows for sure, but you don’t want to reach that point.”

Prospects for de Blasio’s mansion tax appear grim without the support of the governor, and given fierce opposition from Senate Republicans -- Majority Leader John Flanagan has declared the mansion tax a “non-starter.”

Yet, de Blasio offered a series of points in arguing that the mansion tax is very much alive in the final week of budget negotiations.

At a press appearance after the rally, de Blasio said he is confident support from civil rights groups and senior organizations like the AARP will have a mobilizing effect on the governor and Legislature. “AARP has enormous power to influence people on both sides of the aisle,” he said.

Addressing naysayers, de Blasio reminded reporters that people used terms like “dead on arrival” about other progressive policy measures he’s championed in Albany, such as the city’s universal pre-kindergarten program, a $15 minimum wage, and paid family leave, each of which was passed in some form.

De Blasio also revealed that a Senate version of the mansion tax bill would be introduced by Senator Diane Savino, a member of the Independent Democratic Conference (IDC) whose district includes a sliver of southern Brooklyn and parts of Staten Island. “We think with her leadership, that will help us to draw more support in the Senate and continue this momentum,” de Blasio told reporters.

The eight-member IDC has a coalition agreement with Senate Republicans and the IDC is often able to push through its pet agenda items because of the leverage it has with the majority.

When asked how she would get the GOP conference on board with the mansion tax, Savino said via email, "Like all legislation that I carry, I plan to lobby my colleagues on the mansion tax which could bring needed revenue to the city."

Senate Republicans, who cling to a sliver of a majority in the chamber, appeared to be unmoved by the groundswell.

Senate GOP spokesperson Scott Reif did not respond to a request for comment but tweeted at a Politico reporter Wednesday morning, writing, “Appreciate that @BilldeBlasio can still find his way to Albany, but this idea has already been rejected.”

Later, Reif added in response to a Gotham Gazette reporter, “We support cutting taxes, not raising them.”

Cuomo was in New York City during the Wednesday rally for the funeral of legendary New York Daily News journalist Jimmy Breslin. While Cuomo and de Blasio are engaged in a long-running feud, de Blasio acknowledged that he needs the backing of the governor to get the mansion tax passed. De Blasio urged Cuomo to consider the senior citizens who stand benefit from the rental subsidy the tax would fund.

“I want the governor and everyone else to remember this is to benefit 25,000 seniors,” de Blasio said. “We need the Governor’s support. There are a lot of seniors depending on him. And look, the voices of seniors are going to be felt. And I know in terms of the New York City Senate delegation, they are all going to hear from AARP. They are all going to hear the strong voices of seniors on this matter...I think that is going to be a game-changer.”

The expansion of the millionaires’ tax and creation of a mansion tax would signal wins for the first-term mayor, who is up for reelection this November. De Blasio, who has been talking up the mansion tax since 2015, again laid out his case last week while on WNYC’s The Brian Lehrer Show, putting it into the larger context of his fight against inequality, especially in the Trump era.

“That is the kind of thing – bluntly – that we’re going to have to do. And if we don’t start addressing this reality of a growing senior population needs affordable housing we will rue the day, and the way we do that is by taxing the wealthy in fair ways and devoting those resources to senior housing,” de Blasio said in the March 10 radio interview.

On Thursday, de Blasio is scheduled to be back in New York City, visiting two senior centers to promote the mansion tax proposal.

by Rachel Silberstein, State government reporter, Gotham Gazette

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In Albany, De Blasio and Democrats Push ‘Mansion Tax’ Wed, 22 Mar 2017 04:00:00 +0000
De Blasio Faces Local Questions About ‘Mansion Tax’ Plan de Blasio speech dining room gracie

Mayor de Blasio (photo: Edwin J. Torres/ Mayor's Office)

A report released by the city Independent Budget Office has raised questions about the potential effects of the so-called “mansion tax,” a proposed part of Mayor Bill de Blasio’s affordable housing strategy that would levy a 2.5 percent surcharge on the sale price over a threshold of $2 million for residential properties.

De Blasio put forward a version of the mansion tax proposal, which requires approval by the State Legislature and Governor Andrew Cuomo, in mid-2015. It failed to gain traction then. The mayor presented the current updated form at an Albany legislative state budget hearing in late January and reiterated it at his State of the City address February 13.

The mayor has said that he hopes the revenues from the tax, estimated by his Office of Management and Budget at $336 million in fiscal year 2018, will be used to subsidize rents for seniors.

The IBO report shows that about 8 percent of citywide home sales between 2014 and 2016 carried price tags of $2 million or more; and of those sales, 86 percent were for properties in Manhattan.

Manhattan Borough President Gale Brewer had requested that IBO examine the impact the tax would have on her constituency. Often in agreement with de Blasio, a fellow Democrat, Brewer told Gotham Gazette that she is opposed to the mayor’s mansion tax proposal.

“Manhattan should not be the cash cow for the rest of the boroughs,” Brewer said during a phone interview, adding that she would be “much more comfortable with [a threshold of] $5 million and not $2 million.”

At the State of the City speech, the mayor told his constituents to “ask [state legislators] if you think someone selling a home for more than $2 million can afford a little bit for senior citizens.” The tax would be paid by the buyer, according to de Blasio’s plan.

Brewer also raised concerns that mansion tax revenues would not be guaranteed to go to rent subsidies. “Any tax that has been enacted then has to be allocated. It could go to seniors, or it could go to homeless services, or it could go to anything,” she said.

Asked if she would publicly oppose and testify against the tax if given the opportunity, Brewer said she would. She said she had not been in touch with the mayor or his staff about the mansion tax specifically, but had heard from constituents concerned about the measure’s effects.

In emailed comments expanding on the report, IBO Chief of Staff Doug Turetsky said there were arguments for and against the tax. A possible issue is the specter of a price cliff: “suddenly you will probably have a lot of sales priced just under the threshold for the mansion tax.”

However, he touted the proposal’s potential to level the playing field, as both co-ops and high-end residential sales paid in cash or with foreign financing are not subject to the city’s existing mortgage recording tax. “As a result, purchasers of a comparatively moderate priced home will likely pay both the city’s mortgage recording tax and real property transfer tax, while many buyers of the city’s most expensive residential properties will only pay the transfer tax,” he said.

Along with skepticism from Brewer, de Blasio is facing a long road to mansion tax passage in Albany, where both Cuomo, a fellow Democrat, and the state Senate Republican majority are philosophically opposed to new taxes. Senate Majority Leader John Flanagan has said his conference is interested in cutting taxes, and he is facing a Cuomo proposal to extend the state’s “millionaire’s tax.”

De Blasio has said that recent progressive victories indicate nothing is impossible to see through Albany if there is enough support. The mayor also argues the city needs the mansion tax revenue to bolster his affordable housing plan, especially for seniors, though the city has been rapidly adding to its budget under the mayor without additional taxes, given revenues have been strong amid a booming city economy.

“I don’t think the mayor has thus far made the case why the tax is needed for any particular agenda he wants to pursue,” said Carol Kellerman, president of the Citizens Budget Commission, adding that “it would seem to us that the mayor and the [City] Council are able to fund anything they need $330 million for” out of the already expanded, $84.7 billion budget the mayor has proposed for fiscal year 2018.

Melissa Grace, a spokesperson for the mayor’s office, dismissed the idea of a price cliff, arguing that, since the tax would only apply for the price over $2 million, “that’s not going to affect any buyer or seller’s behavior.” She also pointed out that the average home purchase affected by the tax would be $4.5 million, an argument the mayor also raised at an unrelated press conference this week when Gotham Gazette asked about his tax plan.

In response to Brewer’s concern of the money being used for other purposes, Grace said that according to the city’s proposal, the funds would go specifically to the recently announced Elder Rent Assistance program and could not be used for anything else.

Asked at a Tuesday press conference about previous statements that the mansion tax was justifiable given tax cuts for the wealthy the mayor is anticipating from Washington, D.C., the mayor said that President Donald Trump “has been salivating for the opportunity to reduce corporate taxes and taxes on the wealthy...So I think it’s a really, really good betting assumption there will be tax cuts for the wealthy and the corporations.”

The mayor added that, even if a federal tax cut does not materialize, “I still think the mansion tax makes sense...Someone who’s buying a $4.5 million home can afford to spend a little bit more.”

by Felipe De La Hoz, Gotham Gazette

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De Blasio Faces Local Questions About ‘Mansion Tax’ Plan Thu, 23 Feb 2017 05:00:00 +0000
Beware of 'Common Sense' Arguments Against the Millionaire's Tax Speaker Carl Heastie

 Assembly Speaker Carl Heastie (photo: The Governor's Office)

Higher taxes on New York’s wealthy are on the table in three places for this year’s budget negotiations. Governor Andrew Cuomo’s Executive Budget for 2018 includes an extension of the so-called "millionaire’s tax”. The state Assembly has decided to see the governor and raise him with their proposed “gazillionaire’s tax”, while Mayor de Blasio has proposed a “mansion tax”.

The Democratic-controlled Assembly favors them all. The Republicans, who control the state Senate, are against all three. But the governor exerts a great deal of control over the New York State budget process and holds most of the cards. And while the governor is the one proposing the extension of the millionaire’s tax, he doesn’t appear to support the others. So is there any reason for progressives to believe that the mansion tax, let alone the gazillionaire’s tax, might pass now?

For starters, taxes on the wealthy are broadly popular with voters. Just like raising the minimum wage, even Republican voters tend to favor these types of taxes, as do the wealthy themselves irrespective of party affiliation. A recent Siena Poll showed New Yorkers in favor of extending the millionaire’s tax by a margin of 74 percent to 23 percent, with 61 percent of Republicans on board along with 81 percent of Democrats.

On the other hand, Republicans are offering arguments that have worked before. They say that New York is already over-taxed, and that taxes on the high earners will just drive them to leave the state and take their job-creating business with them. Corporate-backed “non-partisan” groups take the same position, as Governor Cuomo often does as well.

If Republicans can be said to believe in just one thing, it is that progressive tax policies will drive the rich away and impoverish all who remain, bereft of “job creators”. From Ayn Rand and Galt’s Gulch, to Ronald Reagan and the Laffer Curve, to ALEC and Stephen Moore today, the argument that higher taxes will make the rich work less or move to some promised land of lower taxes is one of the most consistent pieces of Republican philosophy. But are any of their arguments actually grounded in observable reality? 

Republicans rarely cite any empirical research to back their claims. Why should they when it’s just “common sense”? But does reality back up the “common sense” of the GOP? The answer is definitively “no”.

Study after study after study has shown no significant pattern of wealthy people moving from high-tax to low-tax states, and no noticeable change in the net migration rates of high earners between US states in the wake of changes in their relative tax rates. And there is no evidence that either hours worked or income earned by high earners overall is reduced meaningfully by higher tax rates.

Republicans can always find anecdotal evidence that high taxes will drive or are driving the rich from high to low-tax states. But one rich person who moves from Manhattan to Miami proves nothing. All kinds of people, rich and poor, move from New York to Florida every year. And all kinds of people move from Florida to New York. The net effect is tiny, and made up for by people moving to New York from other states and other countries.

New York’s millionaire’s tax first passed in 2009. As you can see here, here, here and here, the primary argument used against it was that rich people were going to move. And when the millionaire’s tax was renewed in 2011, the same arguments were made, including by Governor Cuomo himself.

With the better part of a decade’s worth of data, were the “common sense” mongers of the Right actually correct? No, no and no. New York’s rich haven’t flown off to lower tax states. Property values at the upper end of the New York real estate market have risen unabated. All their warnings have come to naught.

So Assembly Speaker Carl Heastie and Assemblymember Herman Farrell, armed with observable fact and measurable experience, have introduced the gazillionaire’s tax. It extends the logic of the millionaire’s tax with a series of four additional tax brackets starting at $5,000,000 and adding at most 1.5 percentage points of incremental tax on incomes over $100,000,000 per year. That’s not a typo, and yes there are multiple households in New York with annual incomes above $100,000,000, and former Mayor Michael Bloomberg’s isn’t the only one.

The objections to the gazillionaire’s tax are no different than the objections to the millionaire’s tax, and they are just as certain to be completely wrong in the real world. Republican arguments against higher taxes are premised in deeply faulty views of both human nature and economics. The richest of the rich don’t wake up every morning and say, “Hmmm, I will work today if my tax rate is 47 percent, but I will go back to sleep or move to Florida if it’s 48.5 percent.” We are talking about people who could never spend all of the money they have already earned. They keep working as hard as they do for a variety of reasons, like relative success, prestige, and actual enjoyment in their work, with take-home pay being just one item on a long list.

Arguments against the mansion tax are essentially the same but even weaker. They don’t even have “common sense” to fall back on. Where’s the common sense in stating that a 2.5 percent tax surcharge on proceeds in excess of $2 million will have any effect on home sales? Are people not going to move when it’s time to move because of it? Of course not. It’s just a wealth tax applied on a transactional basis.

Massive, long-term, structural trends -- trends that many Trump voters are incidentally rebelling against -- have been and will continue to drive the relative success of America’s, and the world’s, largest and strongest cities. Clusters of like-minded people, of competitive college graduates from all over the country and the world, will continue to grow and prosper. “Trends” that major industries, like financial services, are going to move to low-tax states are perennially flogged by the Right. But they never actually happen.

So the next time you hear someone say, “You can’t raise taxes on the rich in New York, they already pay too much and they’ll just move to Texas or Florida; it’s just common sense”, you should say, “Yes we can raise taxes on the richest New Yorkers, all of the data over many years and many studies has shown definitively that they aren’t going anywhere, so you can stick your common sense in a hot, humid, boring low-tax state with low-wage jobs.” Now that’s just common sense.

Gus Christensen is a financial consultant to non-profits and start-ups, as well as a former investment banker and political candidate.

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Beware of 'Common Sense' Arguments Against the Millionaire's Tax Thu, 16 Feb 2017 06:20:21 +0000