Finally, a major Democratic politician admits it.
[Governor Andrew] Cuomo said the super-wealthy in New York – accounting for 1 percent of tax filers – end up paying 46 percent of the personal income taxes the state collects each year.
“Tax the rich. Tax the rich. Tax the rich. We did that. God forbid the rich leave,” Cuomo said of a mobile group of people who can more easily switch residences to states with lower state and local tax levels.
This is from Tom Precious, “‘Serious as a Heart Attack’: Cuomo Warns of Falling State Revenue,” The Buffalo News, February 4, 2019.
READER COMMENTS
Thaomas
Feb 8 2019 at 7:46am
Fortunately this consideration — interstate mobility — would not stand in the way of asking high income people to contribute more in Federal taxes.
Andre
Feb 8 2019 at 8:59am
“asking”
Inapt euphemism for “requiring.”
robc
Feb 8 2019 at 9:10am
I didn’t even get as far as “asking”, I was stuck on “Fortunately”.
David Henderson
Feb 8 2019 at 10:21am
Good catches, Andre and robc. Especially on “asking.”
Devil's Advocate
Feb 8 2019 at 8:26am
Prof Henderson,
Wondering your thoughts on the Laffer Curve, as it possibly relates to this posting?
David Henderson
Feb 8 2019 at 10:23am
I might post a longer response as its own post in the next few weeks.
For now, I would note that being in the prohibitive region of the Laffer Curve, where an increase in tax rates reduces revenue, is more likely in one of the 50 states than in the United States. The reason: when the state government raises tax rates, a resident has, as an alternative, moving not just to another country but also to one of the other 49 states.
Jairaj Devadiga
Feb 8 2019 at 10:50am
You wrote:
being in the prohibitive region of the Laffer Curve, where an increase in tax rates reduces revenue, is more likely in one of the 50 states than in the United States. The reason: when the state government raises tax rates, a resident has, as an alternative, moving not just to another country but also to one of the other 49 states.
Shouldn’t that make it less likely in one of the 50 states, since it is easier to move from one state to another than to a different country?
David Henderson
Feb 8 2019 at 1:39pm
I’m saying that a tax increase by a given percentage is more likely to lose revenue when a state government does it than when the feds do it. Sounds as if you’re saying the same thing.
Vivian Darkbloom
Feb 8 2019 at 1:03pm
“The reason: when the state government raises tax rates, a resident has, as an alternative, moving not just to another country but also to one of the other 49 states.”
Correct. But, as I suspect you know, moving to another country does not allow one to escape *federal* income tax if one is a citizen or a long-term lawful permanent resident (generally, “green card holder”). This is due to the existing US exit tax and other consequences of giving up citizenship under so-called US “expatriation” provisions of the tax code and immigration rules.
This is a point well understood by Emmanuel Saez and Gabriel Zucman who were instrumental in designing Warren’s wealth tax plan. Their proposed plan would include an exit tax of *40 percent* on the wealth of expatriating citizens that exceeds $50 million. Nota bene this is not a tax on the accrued gains of such persons, but on *wealth*.
https://www.newyorker.com/news/our-columnists/elizabeth-warrens-wealth-tax-is-an-old-idea-and-its-time-has-come
The journalist reporting on this in the above article calls this provision (apparently without any hint of disapprobation) “punitive”. He’s right. And, although the description in the article is likely short-hand, it omits reference to green card holders. Since when is the purpose of the tax code to *punish* people for exercising their civil liberties?
https://www.newyorker.com/news/our-columnists/elizabeth-warrens-wealth-tax-is-an-old-idea-and-its-time-has-come
I can understand some logic behind an exit tax on gains that accrued during the period one was subject to US tax and also an argument for “fairness” on taxing accrued “gains”; however, a *punitive tax* on *wealth* (at 40 percent!) on which income tax has already been paid is a bit extreme. (This reminds me of how recently Saudi billionaires were imprisoned in a hotel and not allowed to leave until they paid a large ransom to the government). This type of policy suggestion doesn’t even seem to raise any eyebrows in the media. In this age when the talk about “walls” is so common, one can easily picture in one’s mind a “wall” being proposed to keep wealthy people in. Not only that, while the emphasis of Cuomo (and other other comments here) is on New Yorkers leaving New York, the equally important factor is that extreme tax policies such as this will keep certain people out. That is, the same type of person who might just contribute greatly to the tax coffers if the government doesn’t get too greedy. In this respect, this is not only a proposal to build a virtual wall to force wealthy people to stay in, but a virtual wall is being built that will effectively keep wealthy people out of the US. Those are the same people who might otherwise have much to contribute to the US Treasury.
mobile
Feb 8 2019 at 2:10pm
Every billionaire that flees from your tax jurisdiction is a policy failure.
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