‘We will ask the very wealthy to pay a little more in taxes so that we can offer full-day universal pre-K and after-school programs. . . And when we say ‘a little more,’ we can rightly emphasize the ‘little.’ Those earning between $500,000 and $1 million a year, for instance, would see their taxes increase by an average of $973 a year. That’s less than three bucks a day — about the cost of a small soy latte at your local Starbucks.”
That’s how Mayor de Blasio described his proposed tax increase in his inaugural address. But the reality is that when those making over $1 million a year are factored in, the average tax hike comes to about $12,000.
Both de Blasio’s figures and mine are based on calculations by the Independent Budget Office. The IBO showed that de Blasio’s plan to raise the city’s personal-income tax rate from 3.876 percent to 4.41 percent on those earning more than $500,000 would indeed raise taxes by $973 on the 21,000 filers earning between $500,000 and $1 million. But if you include the 19,000 filers in New York City that bring in more than $1 million annually, the average tax increase rises to $12,038.
In percentage terms, the increase to the tax rate on income above $500,000 would be 13.8 percent. And this same group is already being socked with the Obama administration’s hikes in the income and capital-gains taxes, and a special Medicare investment tax. All totaled, the increases on the wealthiest are not “little” at all.
There are real questions emerging as to why de Blasio wants these tax increases, as it looks increasingly like they have little to do with improving education.
In his budget address, Gov. Cuomo already offered a plan to expand pre-K and after school programs throughout the state without raising taxes. And if the Cuomo plan isn’t sufficient for de Blasio, another IBO analysis shows that New York City could raise more than enough to pay for pre-K and after school ($535 million) by requiring employees and pre-Medicare eligible retirees to contribute 10 percent of their health-care premiums, which would still leave them below private-sector contribution rates. (It is also worth noting that New York City already spends nearly $25 billion a year on education, about $22,000 per student.)
The 40,000 households earning more than $500,000 already contribute 43 percent of the city’s income-tax revenues. These folks are a highly mobile group and many are already fleeing to low-tax states like Florida. Do we really want to encourage that trend?
The de Blasio tax hike is not little, not fair and not good policy. At some point New York’s high earners will say “enough is enough.”
Lawrence Mone is the president of the Manhattan Institute for Policy Research.