It is time for the rich to pay more.
When billionaire former New York City Mayor Mike Bloomberg proposes raising taxes on the wealthy and corporations, we know it must be well past time to do just that.
It’s certainly true, as Governor Andrew Cuomo maintains, that the cap on the federal deductibility of state and local taxes (the SALT deduction) was a politically motivated attack on blue states like New York and California. But we shouldn’t lose sight of the fact that the wealthiest and big businesses in New York benefited handsomely from gigantic 2017 federal tax cuts.
Let’s not forget that long before Trump was sworn in, Governor Cuomo had pushed through several tax cuts for New York’s wealthy, big banks and corporations. State tax cuts enacted between 2011 and 2016 reduced revenues by at least $5 billion, and while some of that has gone to middle-class taxpayers, much has gone to the wealthy and big business.
In fact, several elements of the governor’s whole fiscal policy approach are problematic like the 2% state pending cap that has slashed funding for critical human services, sharply reduced support for CUNY and SUNY and constrained the ability of local governments to function all across the state. Adherence to his so-called “global Medicaid spending cap” led budget officials to use various accounting maneuvers to obscure the growth in Medicaid spending. Instead of the $6 billion Medicaid shortfall surprise this year, honest budgeting would have shown three or four years ago that real management efficiencies and more revenues were needed.
INCREASED MEDICAID COSTS
With the state expanding coverage under the Affordable Care Act and cutting its uninsured rate in half to 5.4%, you would expect to see some increased Medicaid costs. In New York City, 3.5 million residents rely on Medicaid – 6 million statewide – and with the aging of the population, costs are increasing for long-term and personal care services needed to keep people in their homes. Management improvements are needed to rein in skyrocketing personal care costs, but providing health care to hundreds of thousands more requires more revenue at some point.
The place to start in seeking additional state revenues should be to revisit ill-considered corporate tax cuts enacted in 2013 that heavily favored big banks and targeting those who cashed in bigtime from the 2017 Trump tax cuts. A recent Hart Research poll showed that nine out of 10 New York voters support raising taxes on wealth over $1 billion, incomes over $5 million, and luxury homes and apartments owned by nonresidents.
No one wants to see their taxes rise, and recently elected state senators are understandably wary given that they’re facing voters again this fall when there’s no shortage of well-funded, anti-government apostles out there. Leadership means marshaling the evidence, and broad support in favor of sound public policy. Why shouldn’t New York’s corporate taxes be restored to where they were relative to the size of the state’s economy in 2013? That would raise $2.5 billion. Why shouldn’t LLC filing fees on highly profitable hedge funds, private equity funds and real estate partnerships be increased to raise $1 billion, a fraction of the windfall those entities received courtesy of the Trump tax cuts?
MONEY FOR SCHOOLS
The continued economic expansion means that state tax revenues are projected to rise by 5.2% a year over the next two years. That will help address the Medicaid funding shortfall, but there’s no escaping the fact that New York has been underinvesting in education – at all levels, public higher ed, K-12 and early childhood education. New York businesses benefit day in and day out from a well-educated population and workforce, and they should help pay for it. That’s just smart, and fair, business.
In the last two recessions, New York has turned to the progressive income tax to help offset revenue shortfalls. We may need to do that again when the inevitable economic slowdown or decline occurs. We should keep that in mind as revenue options are explored this year.
It’s heartening to see broad support around the state for the idea of appropriately taxing luxury New York City real estate owned by nonprimary residents who aren’t paying New York income taxes. As a member of the New York City Advisory Commission on Property Tax Reform, I know how critical such a tax is to making the numbers work on long-overdue property tax reform needed to rectify glaring inequities here in New York City. Property tax relief for thousands of moderate- and middle-income homeowners hangs in the balance. Manhattan luxury homes are, after all, part of New York City’s property tax base, not the state’s.
James A. Parrott, director of economic and fiscal policies at the Center for New York City Affairs at The New School, is also an adjunct professor in the Roosevelt House Public Policy Program at Hunter College.