In a blistering diatribe bemoaning the loss of almost $3 billion in anticipated tax revenue to New York state’s coffers, Gov. Andrew Cuomo finally seems to have grasped an important truth: overtaxing high earners backfires and actually hurts the working class and middle class.
This is something conservative pundits have been shouting out for years. And, of course, the typical liberal response was: Stick it to the rich! If only they paid their fair share of taxes (meaning a lot more than they pay now), we’d have the revenue necessary to cure all our social ills.
This belies the fact that the top 1 percent of earners already pay 46 percent of the money New York state collects in personal income taxes.
Yet New York City Mayor Bill de Blasio suggests that “wealth is in the wrong hands” and needs to be redistributed in a manner that would warm the heart of Vladimir Lenin, the communist revolutionary who went on to lead the Soviet Union after the Russian Revolution.
Then there is U.S. Rep. Alexandria Ocasio-Cortez, D-N.Y., a self-described democratic socialist who claims that a 70 percent tax rate on multimillionaires will give us the funds needed to expand Medicare to every resident and supply free college.
But as we’ve seen so many times in the past, when politicians overtax their constituents, revenues to the treasury can actually decrease.
On the other hand, when the 70 percent rate that Ocasio-Cortez raves about was slashed by President Kennedy, the eight years that followed showed 5 percent annual growth in the gross domestic product, a 62 percent increase in tax revenues, and wages that soared.
Cuomo needed a convenient scapegoat to blame for New York’s drop in tax collections. He ascribed the revenue drop to the tax cut signed into law by President Trump. The legislation also imposed a $10,000 limit on total state and property tax deductions.
The New York governor has now suddenly realized that over-taxation can kill the goose that laid the golden egg. Residents who’ve had enough will simply take their money elsewhere.
But it’s not as though New Yorkers are just starting to leave the state as a result of the Trump deduction cap. The Empire State has been seeing a larger exodus of residents to cheaper pastures than any other state in the nation. According to the Empire Center, almost 1.2 million New Yorkers have moved out of the state since 2010.
To liberals – such as Sens. Elizabeth Warren, D-Mass, and Bernie Sanders, I-Vt. – who despise those who succeed in business, soaking the rich is social justice. It’s a vehicle to eradicate income inequality.
But we now know that fewer high-income earners mean less income to tax, and that means less money available to assist those on the bottom rungs of the socioeconomic ladder.
I saw this as a member of the New York state Assembly. Many colleagues who enjoyed bashing the rich knew that a bad year on Wall Street meant smaller bonuses for the traders and far less money streaming into the state coffers. A good year meant a flush treasury and funding available for the not-for-profit and government programs designed to help those in need.
So while Cuomo is happy to connect the loss of the wealthy to the Trump plan, why does he refuse to acknowledge that New York’s high taxes have been chasing away New Yorkers for years?
Comically, just last year Cuomo blamed the exodus on the state’s cold weather, rather than on the true culprit – the fact that New York for years has ranked as the most overtaxed state in the nation when combining state and local taxes, according to the Tax Foundation.
When Cuomo first ran for governor in 2010, he promised to end the so-called “temporary” surcharge on high earners implemented after the Great Recession. Eight years later, the almost 9 percent state income tax remains.
Token cuts to mid-level earners and corporations made for good press releases, but were so small they did nothing to stem the state’s outward migration. The 2 percent property tax cap ushered in by the governor was laudable, but it is merely slowing the growth of what are the highest property taxes in the nation. The median property tax bill in Westchester County – over $13,000 – is the highest in the nation.
I applauded Trump’s tax cuts, which have actually slightly increased overall tax revenue to the U.S. Treasury, while boosting wages and gross domestic product over the 3 percent level.
Yet as a New Yorker, I opposed the cap on state and local deductions contained in the Trump tax legislation.
The cap may indeed have contributed somewhat to the exodus of the wealthy from New York, but liberals like Cuomo, Ocasio-Cortez and Sanders can’t have it both ways. They can’t say that Trump’s hit on the rich in high tax states caused some of the wealthy to move their money, while continuing to deny that their own proposed millionaire taxes will not.
It’s actually gratifying to see liberals waking up to the fact that higher taxes can affect behavior in a very negative way – not only for the wealthy, but for others who will suffer due to less revenue in government budgets.