They finally have second thoughts on taxing the rich—a little late.
by The Wall Street Journal Editorial Board, December 18, 2022
’Tis the season for epiphanies, and what do you know? It’s finally dawning on some New York Democrats that the state’s steep income tax rates are driving away top earners who fund essential public services. If only this wisdom had visited Democrats in Albany before they raised taxes last spring.
Like an annoying music tape that keeps repeating, progressives are calling on Democratic lawmakers to raise taxes on the rich—again. The Federal Reserve’s monetary tightening has resulted in lower capital gains and trading revenue on Wall Street, which is hurting state and local budgets. Meantime, pension and healthcare costs are climbing.
Yet miracles of miracles, Gov. Kathy Hochul last week ruled out tax increases and said she planned to hold the line on spending next year. “I don’t believe that raising taxes, at a time when we just cut taxes, makes sense,” she said. By tax cuts, she’s referring to one-time property tax rebates for middle-income homeowners that doubled as election bribes.
New York City Mayor Eric Adams last week also shot down a tax increase: “To continually attack high-income earners when 51% of our taxes are paid by 2% of New Yorkers—it blows my mind when I hear people say ‘so what if they leave.’ No, you leave! I want my high income earners right here in this city!” Nice to hear, but he’s a little late.
A New York City Independent Budget Office report this month showed that the number of taxpayers who earned between $1 million and $5 million plunged 11% in 2020 from the prior year. Democrats can’t blame the Fed whose ultra-loose policies helped boost asset prices and thus capital gains among the top 1% by $14 billion, or 37%, that year.
The culprits are high taxes and Covid lockdowns. According to IRS data, New York County lost $14.5 billion in adjusted gross income from out-migration between 2019 and 2020. And this was before Democrats in Albany last spring raised income taxes on individuals making more than $1 million, jacking up the combined state and New York City top rate to 14.8% from 12.7%.
Even New York Comptroller Thomas DiNapoli, who is no moderate, told Bloomberg News last week that the exodus of taxpayers at the upper end “should be a concern for everybody.” He added that “we might be getting near that tipping point where we do make it economically unsustainable for enough of those folks to stay here.”
Democrats have already passed the tipping point, judging by the thousands of high earners who have fled to Florida and other lower-tax climes. But don’t bet on Democrats’ new-found wisdom lasting. “I don’t believe in raising taxes on the rich,” then Gov. Andrew Cuomo said in February 2019. Read his lips. “Tax the rich. Tax the rich. Tax the rich. We did that. God forbid the rich leave.”
Two years later he taxed the rich more—and, God didn’t forbid, more of the rich left.