« | »

AP: Taxing Rich Backfiring On New York

A good article for the Associated Press to sneak out on a sleepy Sunday morning:

A man walks out of an Internal Revenue Services office after filing his taxes on Tax Day in New York, April 15, 2009.

Risky business: States tax the rich at their peril

By Michael Gormley, Associated Press Writer Sun Sep 27

ALBANY, N.Y. – This year, New York’s deep-pocketed rich were required to dig even deeper to help shore up state finances.

They now pay higher taxes on their income and on limousines and yachts, more to enter a horse in a race and more to dabble in real estate. Meanwhile, many are losing millions from the closing of business tax loopholes and those making over $1 million are losing tax deductions others get.

It even costs more to hunt foxes or pheasants and have their taxes prepared.

Now, a half-dozen states in this recession-driven movement are nervously eyeing New York to see if it’s wise to demand so much from people rich enough to have a second home in less taxing states — and for whom a change of address can be its own tax break.

Early data from New York show the higher tax rates for the wealthy have yielded lower-than-expected state wealth. Gov. David Paterson, who had always warned targeting the rich could backfire, fears that’s just what happened.

Paterson said last week that revenues from the income tax increases and other taxes enacted in April are running about 20 percent less than anticipated.

The concern about millionaire flight has prompted some states, including New York, New Jersey and California, to increase the highest tax rates only temporarily. For New York, it’s the second temporary increase for high earners since 2001.

The first one ended as scheduled after three years. But Paterson and economists warn that came as the economy began to grow fast into another boom, something that isn’t expected now because Wall Street — which historically provided 20 percent of state revenues — is perhaps permanently downsized…

So far this year, half of about $1 billion in expected revenue from New York’s 100 richest taxpayers is missing

State officials say they don’t know how much of the missing revenue is because any wealthy New Yorkers simply left.

But at least two high-profile defectors have sounded off on the tax changes: Buffalo Sabres owner Tom Golisano, the billionaire who ran for governor three times and who was paying $13,000 a day in New York income taxes, and radio talk-show host Rush Limbaugh. Golisano changed his official address to Florida, and Limbaugh, who also has a Florida home, announced earlier this year that he was relinquishing his home in Manhattan.

Donald Trump told Fox News earlier this year that several of his millionaire friends were talking about leaving the state over the latest taxes…

Maryland enacted higher tax rates for wealthier residents in 2008 to boost revenues but income from those taxes is down 6.7 percent so far this year…

The approach has been tried before.

The conservative-leaning Tax Foundation said that through the early 1990s, several states maintained double-digit income tax rates for the higher earners. Those rates were dropped, however, in the boom of a fast-growing economy.

States also realized that having a higher tax rate than their neighbors would cost them talent, lose jobs and hinder economic growth, the foundation reported in May after Hawaii joined Maryland, New Jersey, California and New York to adopt a "millionaire’s tax." New York, for example, has been careful not to raise its highest rates above New Jersey’s, according to the foundation

In May, the most recent calculation available, Maryland reported that taxes collected from top earners fell by about $100 million. The number of Marylanders with more than $1 million in taxable income who filed by the end of April fell by one-third, to about 2,000.

Often pushed as a "fair tax" measure and backed by public worker unions, pinching the rich could backfire.

"You can say, ‘The millionaire is evil,’ but they don’t just put their money in a coffee can," said Christopher Summers, president of the nonpartisan Maryland Public Policy Institute. "They employ people … That fact is, you need rich people to keep working hard so they will invest."

Mind you, it’s just the limousine riding, race horse owning, fox and pheasant hunting crowd who will have to pay more taxes in New York.

It doesn’t really affect people like you or me.

Gov. David Paterson, who had always warned targeting the rich could backfire, fears that’s just what happened.

And when the Associated Press says “who had always warned,” they of course mean that he has never warned.

This article was posted by Steve on Monday, September 28th, 2009. Comments are currently closed.

3 Responses to “AP: Taxing Rich Backfiring On New York”

  1. Tater Salad says:

    Hey, Obama needs the money for his Muslim buddy over there in Libya.

    From CBS2Chicago:

    Kirk To Obama: Withdraw Grants To Libyan Charities

    $400,000 Is To Be Split Between Charities Run By Gadhafi Family Members

    Sep 24, 2009

    WASHINGTON (CBS) ― The Obama Administration plans to give $400,000 in funding to a Libyan charity run by the Gadhafi family, and U.S. Rep. Mark Kirk (R-Ill.) wants the grant withdrawn.

    The money would be divided between two foundations run by the family of Libyan leader Muammar Gadhafi. A $200,000 share is set to go to the Gadhafi Development Foundation, which is run by Gadhafi’s son, Saif, and another $200,000 are to go to Wa Attassimou, an organization run by Muammar Gadhafi’s daughter, Aisha.

    Kirk says the grants should be withdrawn in light of the recent return to Libya of Pan Am Flight 103 bomber Abdel Baset Megrahi. The terminally ill prisoner was released from in Scotland on compassionate grounds, and got a hero’s welcome from Muammar Gadhafi and other Libyans upon his return.

    Saif Gadhafi was involved in negotiating for Megrahi’s release, and accompanied him back to Libya.

    “Just weeks after the Gadhafi family celebrated the return of a terrorist responsible for the murders of 189 Americans, the U.S. taxpayer should not be asked to reward them with $400,000,” Kirk wrote to the president. “For the sake of the victims’ families who have endured so much pain these last few weeks, I ask you to withdraw your Administration’s request.”

    The Gadhafi Development Foundation is described by the BBC as “a charity which tries to project a new and positive image of Libya.”

    The U.S. State Department has not issued a response to Kirk’s request.


  2. canary says:

    One of my greatest concerns is Obama desire to demolish states rights.

  3. proreason says:

    Don’t tax receipts ALWAYS go down when taxes are ladled on the wealthy.

    It’s easy to understand.

    They have the means to hire lawyers and move their resources so that they won’t be taxed.

    It’s not like it’s PRESSING to replace the yacht this year.

    It really makes you wonder about the intelligence of politicians.

    As if we didn’t already know about that.

« Front Page | To Top
« | »