Income Tax Reform Now: Cuomo Officially Declares Current System "Unfair" To Middle Class

Governor Cuomo last month (Governor's office)

The rumors are true! Governor Cuomo's office has sent an op-ed written by the governor expressing his support for tax reform. You can read the whole thing below, but here's one key paragraph: "In New York under the permanent tax code, an individual making a taxable income of only $20,000 pays the same marginal tax rate as an individual making $20 million. It’s just not fair. While New York’s earned income tax credit, child care credit, and high standard deduction help working poor families, New York has left the middle class with an undue burden which also hinders our economic recovery."

New York needs to enact a bold, innovative economic plan and tax code reform to create jobs at this difficult time. To achieve that we will need bipartisan political cooperation and a plan the people of the State support.
I believe economic development, popular support, and political consensus must all be built on the same foundation: fundamental fairness.

Last year, when we were preparing the state budget, I exposed that the system was inherently biased against the taxpayer. The very definition of the State’s budget deficit included statutory annual increases for individualized programs marbleized through the State’s budget laws. In short, “deficit” meant the amount necessary to fund a 13 percent increase. The taxpayer didn’t have a chance.

Our current tax system is also unfair.

I have posed the following question to Albany veterans, befuddling almost all: at what income level does the State’s top personal income tax rate become effective? Answers range from about $100,000 to $1 million. Virtually no one guesses the correct answer: only $20,000 for an individual taxpayer; and only $40,000 for a two-earner family. So, in New York under the permanent tax code, an individual making a taxable income of only $20,000 pays the same marginal tax rate as an individual making $20 million. It’s just not fair. While New York’s earned income tax credit, child care credit, and high standard deduction help working poor families, New York has left the middle class with an undue burden which also hinders our economic recovery.

From a competitive point of view, New York’s tax system is behind. Other states and the federal government have an income tax code that is fairer than New York’s. Unlike New York, 22 states apply their highest rate to incomes higher than our $40,000 level. Also, unlike New York, where the range between its lowest rate (4%) and its highest rate (6.85%) is only 2.85%, 28 other states have larger ranges that reflect a fairer distribution of the tax burden. Even the federal system has more progressivity: a range of tax brackets that spans from 10% to 35%, and the top not kicking in until taxable income exceeds $379,000.

New York is the progressive capital of the nation yet there have been no real tax reform efforts in the state in decades, only periodic gimmicks. From 2003 to 2005, we added two new temporary surcharge brackets. In 2009 we enacted the “millionaire’s tax,” which expires at the end of this year. The millionaire’s tax purported to shift the tax burden to the super wealthy to alleviate the burden on the middle class. But it failed on both counts. It actually raised taxes on people who were making $200,000 - hardly “millionaires.” And it did absolutely nothing to lower the disproportionately high tax burden on middle class families, who continue to pay the same marginal rate whether they make $40,000 or $299,000 in taxable income.

We must reform our tax system to stimulate the economy and restore fundamental fairness.

First, we need to reform the code in a way that creates jobs and grows our economy. To do that, we need to put more money in New Yorkers pockets and inject it back in to the economy. There are also tax credits that can incentivize private sector job growth.

Second, true reform for fairness has two factors: income brackets that fairly group income levels and progressive rates increasing with income. Simply put, to me “fairness” dictates that the more you make the more you pay and the higher your income the higher your rate. Also, you should be treated the same as people with similar incomes and differently from people who make significantly more, or significantly less, than you earn. I would create multiple brackets and rates increasing on a graduated basis throughout and indexed to inflation. I would add more income brackets for the middle income and add high end brackets. The actual rate span should be several points from low to high.

Our State Legislature will need to act, swiftly and effectively.

I believe we can avoid partisan gridlock and make government work by forging a plan that is based on fundamental fairness rather than political ideology.

During these difficult times, New Yorkers will step up and do their part to create jobs and revive our economy - but the system must be fair for all. Our State deserves nothing less.

Governor Andrew M. Cuomo

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

By Jen Chung in News on December 5, 2011 5:20 PM

Comments [rss]

Guest

A fair tax would be a flat tax.

marco_esquandolas

If Bloomberg is against it, I'm for it.

LICnative

I don't think anyone would have a problem with higher tax rates for the wealthy if we can be assured that the revenue would be used solely to pay down the debt.

Politicians are addicted to revenue streams like a junkie to a dime bag. Any increased revenue would be used to prop up already failing social policy, or create whole new ones with the requisite bureacracy, lobbyists, special interests , waste and fraud.

We can't keep throwing money down a long dark hole

Alex DiBlasi

"We can't keep throwing money down a long dark hole"
Please, keep the mayor's personal life out of this! :)

ciaobella2

I am WAY more in support of paying taxes in NY state based on my income (which ain't much, but whatever) to support public schools and state programs than I am open to paying more in federal taxes to pay for military spending and interest on national debt. Taxes can never be about a free ride. I'm OK with paying my fair share if it lightens the burden of someone else who really can't afford to pay the same amount of taxes as me. I never thought I'd be so into Andy Cuomo but first gay marriage and now making the wealthier peeps in this state pay up?

And no I don't work for NY state. But check this out:http://www.openbooknewyork.com...

HappilyBookish

I'm glad that at least one legislator has the backbone to say this out loud. Too many of our elected officials--GOP *and* Dems--talk about "shared sacrifice" but don't have the courage to ask for real contributions from the very wealthy.

randomtransplant

Now throw in a windfall tax & use the money to preserve essential services while saying no to fracking, and Cumo will have my vote next time. I'll even take back all the mean things I've said.

seattlesnow

this is news? I remember owing the state when I work at McD's as a teenager

Jason

How about 10% across the broad...if you make $20,000, $200,000 or $2,000,000. Thats fair.

BoerumHillJo

HFS

I can understand having difficulty understanding the arcane tax code, but what's up with the epic reading comprehension fail?

In the permanent, existing tax code, it's the same tax rate for everyone making over $20K - up to infinity.

$20,000 = 6.85%
$200,000 = 6.85%
$2,000,000 = 6.85%
$20,000,000 = 6.85%

Your solution is a regressive tax raise across the board to 10%?

HFS

stewart_nyc

Who knew NYS already had a flat tax?

And in your example:

$20,000 = $1,370
$200,000 = $13,700

Let's just say these two people use the same State services, even though the one with lower income probably uses more. Why should one person pay $10,000 more than the other? Just because he can? If the higher income person goes to McDonald's should the dollar menu be off limits? Maybe they should have to order off a $10 menu?

luke_1

Yes. Because they can. That is how all the developed countries of the world operate, to a greater or lesser degree. And in general, the greater the standard of living a country has, the more progressive the tax rates are. See: all of Scandinavia.

Why is this so hard to grasp for some of you?And yeah fuck NYS. I work part time while going to school and end up owing the state money every year.

Politburo

It's not so much that it's hard to grasp.. I think the problem is sometimes more with the progressive side than the anti.

The anti argument about the unfairness of the tax code is logically correct. Progressives try and dance around this but I think the best argument is to acknowledge (and subsequently dismiss) its inherent unfairness. Life is unfair.

EdwardAmame

"...The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything very unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion..."

So said the father of modern economics and capitalism, Adam Smith

whiteiris

Municipal 'millionaires'

Tax hikes to fund gov’t 1%-ers
Gov. Cuomo, under enormous pressure from public-employee unions and Democrats in
the Legislature to extend New York’s “millionaires’ tax,” is
considering at least some higher taxes on higher incomes. The big irony
here is that much of the money raised from any “millionaire” tax hikes
would go to fund the growing phenomenon of public-sector millionaires.How’s
that? Well, most dictionaries define a millionaire as someone with
wealth (i.e., assets) of $1 million. By that definition, many New York
teachers and the vast majority of police and firefighters are
millionaires, because the “net present value” of their retirement
benefits is well in excess of $1 million.
Read more: http://www.nypost.com/p/news/o...

valerick

Oh look, it's another nonsense link of a dubious source from whiteiris. Why, it must be a day ending in "y"!

"Tim Osman"

Har har har hardy har har - this is a steaming pile of bull shit.

Detex

actually it isn't and that is the problem. Many people are actually wealthier than they assume based on future income and current asset value...

"Tim Osman"

My parents are both retired NYC teachers with pensions and own their home outright. They are not millionaires, far from it.

valerick

So what is the problem, again? People assume their wealth is less than it is because they don't have access to it and you think that says.... what? They should be better at accounting and then they'll feel richer?