Taxing the rich is a fine idea, given the way the distribution of income has evolved in recent decades. Unfortunately New York has already thought of it, and we not only have the highest state and local taxes as a share of personal income in the country (excluding Alaska and, sometimes, Wyoming where mineral taxes account for large share) but also among the most progressive. That is particularly the case in New York City, where a local income tax, over and above the state and federal income taxes, carries part of the burden that is carried by property taxes elsewhere. The rich, to an ever greater extent than most, already pay more here than they would anywhere else in the country. It is at the federal level where the tax burden has shifted in favor of the rich in recent decades, with the regressive payroll tax increased to “save Social Security” (but the money diverted elsewhere), the progressive income tax reduced, investment income taxed at favorable rates, and loopholes created to allow the wealthy to claim their work income as investment income. The favorable treatment of investment income was supposed to increase savings and investment, but instead the savings rate fell to zero. If suburban and upstate counties want to enact local income taxes to replace part of their property tax burden, that’s fine with me. Otherwise, leave taxing the rich to President-elect Obama, who I’m sure will get around to it sooner or later.
Perhaps our elected officials ought to dare to consider who pays less here than just about anywhere else in the country, rather than those paying more than anywhere else, when looking for revenues. Reducing sales tax exemptions, STAR breaks, income tax breaks, and Empire Zone breaks, as the Governor has proposed, is a start. Particularly if rates are cut, rather than more breaks added, when the economy recovers. Proposing the elimination of all special tax breaks, and forcing their advocates to fight to get some of them back, all over again would have been better. It could be sold to the state legislature as a way to induce more campaign contributions. But not even Governor Paterson mentioned those with the biggest break of all. And the Working Families Party, which desperately wants a business owner with $300,000 in earnings to pay more, doesn’t dare question why someone with $300,000 in retirement income — or $1 million — pays nothing. Given that younger generations are worse off, how progressive is that?