Fair Share Tax Reform:

Solving New York's Budget Crisis Through Real Shared Sacrifice

New York is facing a growing budget deficit for the 2009-2010 Fiscal Year. Clearly, any solution will require shared sacrifice and cuts to popular programs, but working families shouldn’t bear the burden alone. Real shared sacrifice will require not just cuts - but reform of New York’s Personal Income Tax to raise sorely needed revenue.

Tax Cuts for the Wealthiest New Yorkers Result in $8 billion in Lost State Revenue Each Year

Over the last 30 years, New York has reduced income tax rates on the wealthiest New Yorkers by more than 50% and eliminated high income tax brackets so that working class families and the very rich pay the same tax rate. These changes have resulted in a loss of $8bn of state revenue a year.

While taxes for wealthy New Yorkers have gone down, their incomes have skyrocketed. The wealthiest five percent of New Yorkers have seen their share of total income explode by 24% over the last two decades while 80% of working families have seen their share shrink.

How do we propose fixing New York’s Personal Income Tax system?

Any reform should make New York’s income tax more progressive and more fair. Any revenue solution to this year’s budget crisis should include the creation of new income brackets to better reflect the spectrum of income earners and ask wealthy New Yorkers to pay higher rates. Here is one potential model:

These new rates intend to keep New York competitive with states in the region and those with comparable economies. New Jersey’s top rate is 8.97% above $500,000 and California’s is 10.3% over $1 million.

Do Tax Hikes Cause People to Move?

In September, 2008 Princeton University’s Policy Research Institute for the region released “Trends in New Jersey Migration: Housing, Employment, and Taxation,” which found that after New Jersey raised the tax rate on half-millionaires by 2.6% in 2004, the number of half-millionaires has grown by 70%, an extra $1 billion per year has been raised, and people have not left the state as a result. As common sense suggests, people move for many reasons beyond taxes: affordable housing, employment opportunities, education, public safety, and access to health care.

Stiglitz: Raising taxes on wealthy better option than cutting spending

According to Joseph Stiglitz, 2001 recipient of the Nobel Memorial Prize in Economics and Peter Orszag, Director of the Congressional Budget Office, “[r]eductions in government spending on goods and services…are likely to be more damaging to the economy in the short run than tax increases focused on higher-income families.”

Click here to learn more about other options for raising revenue.