Will Rich Really Flee NY If Income Taxes Rise?

'Eek, don't raise taxes on the rich!' Bloomberg and other plutocrats warn, or else they'll defiantly tie their sweaters around their necks and move somewhere else, where the lower orders have a better appreciation for trickle-down economics. But according to a pretty thorough article in today's Times, there's actually scant evidence that an income tax hike on the wealthy will engender a Park Avenue strewn with tumbleweed. In fact, after 9/11, the state and the city imposed a temporary surcharge on incomes of more than $100,000, and a comptroller study suggests it had little impact on those who make over $250K.

Ah, but that was then, before the economic Armageddon. Elizabeth Lynam, a research director at the Citizens Budget Commission, tells the Times, "Things are much more cataclysmic." But Douglas Massey, a demographer at Princeton University, counters that any elites still managing to make bank will pose little flight risk: "In this time of upheaval, people that have an economic stake and have a job are probably going to stay because big incomes are so much harder to come by now."

Professor Massey recently published a study [pdf] examining the impact of New Jersey's 2.6% tax hike on the wealthy in 2004; he estimates that the increase cost New Jersey only 50 to 350 existing "half-millionaire" households—out of 44,000 such households in the Garden State. Sure, the rich folk who moved cost the state $38 million a year in revenue, but those who stayed have brought in some $895 million a year. And because New York is the capital of culture and so many other industries, it seems implausible that the rich will relocate en masse to places like South Dakota because of a little tax increase. No, they will stay. And we will eat them.

Even conservatives who oppose income tax hikes say the rich-flight argument is weak; Edmund J. McMahon, director of the Empire Center for New York State Policy, admits, "I kind of clench my teeth every time Paterson says people will leave. It is the selling point. It’s also a dumb point. Nobody says your wealthy enclaves will shrink dramatically. What they say is that your economy will suffer." Nevertheless, the state Senate doesn't have the votes to raise income taxes on the affluent. But it seems they do have the votes to raise payroll taxes, which disproportionately squeeze the working class. Hendrick Hertzberg has a compelling argument for a payroll tax "holiday" in this week's New Yorker.

Contact the author of this article or email tips@gothamist.com with further questions, comments or tips.

By John Del Signore in News on March 19, 2009 10:08 AM

Comments [rss]

freethepeople

As a member of the Workers Party in New York I'm very pleased that we're raising taxes on those who have benefited most from living in New York.

Anyone making over $100,000 anywhere in America is rich by global standards.

We need to go after the children of the rich too and tax their trust funds and savings at a much higer rate.

With the Federal Tax going to 39%, New York State to 8.6% and New York City Tax to 12% we're still allowing the rich to keep almost 40% of the money. And I might add this is too much for them to keep. The tax rate of anyone earning 100,000 should be at 78% to 83% based on what has worked so well in China.

The Workers Party id fighting for woring class people. We need to raise taxes for more union jobs for teachers.

Let the rich leave New York. We can build government and union jobs to unite the classes and takeover the capitalist greed that has destroyed the collective.

The best model to look at is pure a communist state and New York is leading the way to teach the rest of America where we must be headed to make America a fair country.

Raise taxes to the 80% level to make things fair.

Get the rich out of their housing so prices can be lowered and working class people can take it over.

Tax the trust funds of the rich so the money can be given to the poor.

Transportation should be FREE for anyone who earns less than $40,000 a year. Food should be FREE. All medical should be FREE.

Get rid of the evil rich people in New York. Get rid of the companies. WORKERS OF THE WORLD UNITE! The only answer is a true Communist State.

President Obama will lead us to victory! NOW is our time to take back America and bring about change that is part of The Workers Party mission.

We worked hard with The American Communist Party, The People's Freedom Movement, MoveOn.org and our brothers and sisters in Mexico and Canada who are united to get rid of the capitalist pigs.

WE WON! We got Obama in office and now we must takeover each State one by one.

New York is our first battle ground to break the capitalist pigs. RAISE TAXES and get the pigs out of New York!!!! Get the rich out of America!!!!

freethepeople

As a member of the Workers Party in New York I'm very pleased that we're raising taxes on those who have benefited most from living in New York.

Anyone making over $100,000 anywhere in America is rich by global standards.

We need to go after the children of the rich too and tax their trust funds and savings at a much higher rate.

With the Federal Tax going to 39%, New York State to 8.6% and New York City Tax to 12% we're still allowing the rich to keep almost 40% of the money. And I might add this is too much for them to keep. The tax rate of anyone earning 100,000 should be at 78% to 83% based on what has worked so well in China.

The Workers Party is fighting for working class people. We need to raise taxes for more union jobs for teachers.

Let the rich leave New York. We can build government and union jobs to unite the classes and takeover the capitalist greed that has destroyed the collective.

The best model to look at is pure a communist state and New York is leading the way to teach the rest of America where we must be headed to make America a fair country.

Raise taxes to the 80% level to make things fair.

Get the rich out of their housing so prices can be lowered and working class people can take it over.

Tax the trust funds of the rich so the money can be given to the poor.

Transportation should be FREE for anyone who earns less than $40,000 a year. Food should be FREE. All medical should be FREE.

Get rid of the evil rich people in New York. Get rid of the companies. WORKERS OF THE WORLD UNITE! The only answer is a true Communist State.

President Obama will lead us to victory! NOW is our time to take back America and bring about change that is part of The Workers Party mission.

We worked hard with The American Communist Party, The People's Freedom Movement, MoveOn.org and our brothers and sisters in Mexico and Canada who are united to get rid of the capitalist pigs.

WE WON! We got Obama in office and now we must takeover each State one by one.

New York is our first battle ground to break the capitalist pigs. RAISE TAXES and get the pigs out of New York!!!! Get the rich out of America!!!!

NannyState

Raise taxes .00000235% and see how many "principled Republicans" leave. Or better yet, raise taxes .00000245% and get rid of 'em all.

ides_of_march

In the 60's and 70's a lot of middle and working class DID flee NY and they're a lot less mobile than the rich.

My guess is that both classes may leave en masse and leave NY with nothing but a bunch of welfare recipients with nobody left to mooch off of. Never been to Detroit? Well, Detroit may be coming to you.

matty

I don't think taxes are as much of a problem as unemployment.

KMC

We're really talking about high earners, not the rich here. "Rich" is a measure of wealth that's earned over many years of high earnings. Many of us NYers work in high-risk industries like finance where the earnings are great some years and weak in others. We can hardly call ourselves rich because we had a couple good years. But I will call them "rich" for simplicity.

Of course higher taxes and government spending will have effects. If your taxes went up by $20,000 per year, would you be more likely to move? You may argue that this $20,000 isn't worth as much to the rich but remember that they have to work more to earn it because they pay higher taxes already as it is (~50% marginal rate vs. ~30% for most).

Basic effects:

- Some people ("the rich") will have to work longer/harder to earn the same income. Other people (especially "the poor") will get more benefits and be able to work less to earn the same income.

- Some people will move into or out of the state in response. Of course this won't make anybody's decision but it will on the margin between moving and not. If you already lived on the border of NY state and CT (as many of the rich do), how much would it take to get you to move to CT?

The rich will tend to move out and fewer rich will move in because in NY state, they'll have lower take home than anywhere else. This will tend to squeeze the majority of companies who will see NY as a difficult market to attract labor to. This will result in higher wages but concentrated in specific industries with very high productivity. This is much of what we've seen in NYC where the high wages are concentrated in finance but steady corporate jobs are scarce compared to in other states.

- Finally, the poor will tend to move in to take advantage of any additional government largess.

KRAY

Where are they going to go? Everywhere else sucks.

twain809

RE: "Nevertheless, the state Senate doesn't have the votes to raise income taxes on the affluent. But it seems they do have the votes to raise payroll taxes, which disproportionately squeeze the working class."

State Senators are in the pocket of the rich, who buy them with donations, so that's why those spineless bastards won't raise income taxes on the rich, even if it's the right and best thing to do.

Enlightened despotism, anyone?

Billiamsburg

Yeah that trickle down really did a lot to ease the burden of those making under $500K a year here in New York. Rents are so affordable for the rest of us!

Sinchy

more from David Kay Johnson

http://www.pbs.org/moyers/journal/01182008/watch.html

Endless Ike

Sorry, but this is plain bullshit

for the first time ever Texas now has more Fortune 500 HQs than New York...do you think that number is going to increase or decrease?

Enjoy your tax hikes, you're driving businesses and individuals out of the state

Sinchy

The past 30 years has seen an ever increasing concentration of wealth into the hands of the super wealthy. Trickle down is complete BS, it's been a gusher up!

currently a new yorker making $40,000 pays the same rate as those making $4,000,000 and figuring all the loop holes and tax shelters millionaires exploit It could be a lot less.

http://fairsharereform.com/content/pages/fair_share_plan

My god, if we just raised the rates a few percentage points we could raise billions, and no, it will certainly not cause a mass exodus.

Most people don't want confiscatory tax rates but how about a little bit of progressiveness?

even Plato 2500 years ago realized that a state with too high a wealth disparity is in for trouble:

"The form of law which I propose would be as follows: In a state which is desirous of being saved from the greatest of all plagues -- not faction, but rather distraction -- there should exist among the citizens neither extreme poverty nor, again, excessive wealth, for both are productive of great evil . . . Now the legislator should determine what is to be the limit of poverty or of wealth."

-- Plato (427-347 B.C.):

Listen to David Kay Johnson author of "Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill)"

http://choosingdemocracy.blogspot.com/2008/07/david-kay-johnson-economic-realities.html

JMH

LOL @ "And we will eat them."

fishfryin

"(the rich will) move somewhere else, where the lower orders have a better appreciation for trickle-down economics." if the second part of this statement is taken seriously, what does it say about the lower orders in new york? that they have a great appreciation for trusting their resources to two-faced politicians and increased government control and services? at this point in time i'd say that is a big fail. baseline controls and services are great, but in the last quarter century or so the government has gotten more and more involved (financially, regulatory, etc.) in things that were considered problems like the school system and affordable housing. the problems have only gotten worse with their "solutions"

jackdonaghy

"And because New York is the capital of culture and so many other industries, it seems implausible that the rich will relocate en masse to places like South Dakota because of a little tax increase..."

Exactly. Where would these people head to? California, which is in much worse shape than us? Florida, the foreclosure capital of the country and... well, it's Florida (plus, they apparently have a problem with deadly snakes now)? Texas? Not unless they're fans of W., the Jonas Brothers or awful weather. Chicago? (Matty's here your que)? New Hamsphire? Beautiful place to visit, but...The bottom line NYC has gotten through tough times before and rebounded quite nicely. The City offers too much of everything to leave over taxes.

FryingPan

Oh God, we can only hope the super wealthy flee for somewhere cheaper because I don't see how the bogus theory of "trickle down" has ever helped America. Certainly not in the 25 years it's been a party platform.

With trust fund babies yuppifying the East Village and Chelsea beyond recognition, Trump building skyscrapers along the waterfront so that regular New Yorkers who can't afford his condos feel like we're living in a well, and skyrocketing retail rents so clubs and theatres are being turned into Dunkin Donuts and boutiques (what's happened to the meat packing district and Christopher Street is a crime), the city has long forgotten normal income residents.

You shouldn't be a Wall Street criminal and then enjoy the city. The rest of us will clean it up, just like we always do, but I think we can all agree on one thing, get out of our city!

Bottomless Chips

Oh God, we can only hope the super wealthy flee for somewhere cheaper because I don't see how the bogus theory of "trickle down" has ever helped America. Certainly not in the 25 years it's been a party platform.

Trickle down economics really should be classified as the government centrally planning and using taxes and inflation and expecting the money to trickle down to the public. In all likelihood it will go to no-bid contracts, mafia, foreign interests, petty fraudsters, and businesses with strong lobbyists.

I'd prefer no taxes and let the rich keep their fruits of labor. That way when they buy services there's no middle man to steal it.

nicemarmot

I guess back in the day my family would have been "rich" by these standards. (Since when is $100k rich in NYC????) But unfortunately when you are dependent on bonuses for 85% of your income and your company was not bailed out by the taxpayers and you don't get any bonus at all, you're suddenly a lot less wealthy. That's why we're looking at leaving, not because of taxes.

So basically, those AIG people who got huge bonuses composed entirely of taxpayer money will be sticking around. But the other people suffering from the destroyed economy who aren't getting any help from John Q Public might have to leave.

That's what annoys me so much about all these populist rants - all this damage to the economy was perpetrated by a fairly small number of people, and the people who did the damage are the ones getting bailed out. But everyone else who works in the stock market is just as affected, and not getting any help at all. Not that I'm saying the government should bail them out too, it's just really irritating to hear about "evil Wall Street" when half the people who wrecked our economy weren't even there, and the rest of the people on Wall Street are just as screwed by their irresponsibility as the rest of the country.

wobbleSmith

yeah, wasn't there a recent study that revealed an income of $90,000/yr was necessary in NY for an average $40,000/yr middle class living elsewhere? if that's truly the case, $100,000 isn't even upper middle class in this city. it's barely middle middle class.

anyway, the rich won't leave new york. they'll build floating luxury islands above the city, tethered to the earth by giant chains. and the paupers in "old city" will live off the scraps of the "sky dwellers." it has been foretold! in a final fantasy game i think...