The Millionaire’s Tax Can Solve Everything

New York’s so-called congestion pricing plan (aka the cordon tax) seems to be dead, so some Democrat in Albany has come up with an alternative way of funding transit: the millionaire’s tax. The plan calls for raising $5 billion in five years for mass transit by putting a 3/4-percent income tax surcharge on all New Yorkers who earn more than a million dollars a year. New York Governor Paterson has announced a blue-ribbon commission to study the proposal.

Yeah, tax the rich — that’s the ticket. Why didn’t anyone think of that before? After all, the rich benefit so much from mass transit, so of course they should pay its extraordinary costs. Much better to soak the rich than to try to find a way to make transit work at a lower cost (such as by not doing such foolish things as building the Second Avenue Subway).

If a 3/4-percent tax can raise a billion dollars a year, why stop there? Who really can spend more than, say $250,000 a year? So why not tax millionaires (people who earn more than a million dollars a year) 75 percent instead of just 3/4 percent? That would bring in $100 billion a year (minus, of course, whatever taxes the millionaires are already paying — but those wily millionaires probably have pretty good tax shelters and aren’t paying a whole lot anyway).

This reminds me of the fundraising strategy I often hear from people starting non-profit organizations. “If we could just get ten people to donate $10,000, we would have $100,000!” Or “If we could just get 1,000 people to donate $100 a year, we would have $100,000 a year!” (That’s the origin of the name “1,000 Friends of Oregon” — and last time I heard, they still haven’t found 1,000 people willing to donate $100 a year.)
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Let’s join Governor Paterson in ignoring the fact that if New York raises taxes on millionaires, at least a few of those millionaires will avoid those taxes by moving their jobs or homes to Connecticut or New Jersey, in which case New York City transit would still get a pile of money but other programs in the state would lose whatever taxes those millionaires are paying.

Instead, we have to ask just what is the connection between millionaires and transit. People pay gas taxes knowing that they pay for the roads that they drive on, which is why the Antiplanner calls gas taxes a user fee. But even taxes that are less user fee oriented usually have some rationale. Property taxes pay for fire and police departments that protect properties from disaster and crime. Income taxes pay for safety nets that government provides in case we lose our sources of income.

The connections between taxpayers and tax-funded programs are not always so clear, but when there is no rationale at all except “you’re rich, so we are going to take your money,” there becomes no limit on taxation. Why not charge a 1/4-percent tax on millionaires to pay for homeland security? Maybe a 1-percent tax to pay for schools? A half-percent tax to pay for cleaning New York’s streets?

In other words, why is transit so special that it deserves the bounties from a millionaire’s tax? The answer, apparently, is that New York’s tax-and-spend Democrats are simply out of ideas.

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About The Antiplanner

The Antiplanner is a forester and economist with more than fifty years of experience critiquing government land-use and transportation plans.

22 Responses to The Millionaire’s Tax Can Solve Everything

  1. D4P says:

    Incomes, on average, have declined by 2.5% among the bottom fifth of families since the late 1990s, while inching up by just 1.3% for those in the middle fifth of households, according to an analysis by the Center on Budget and Policy Priorities and the Economic Policy Institute, two liberal think tanks.

    The wealthiest slice of Americans, however, saw their incomes rise by 9%.

    Unlike what happened during the economic boom of the 1990s, lower- and middle-class families did not share in the prosperity of recent years, the report found. In fact, the United States has had its longest jobless recovery and slowest rate of payroll growth during this decade.

    Just saw this today. I’m shocked (shocked!) that Republican governance has made the rich richer and the poor poorer. Why isn’t the wealth trickling down?

    I’m not going to go so far as to say that the ever-widening income gap suggests that the rich “should” be taxed more to pay for things like public transit. But at the same time, the fact that they’re getting richer while the rest of us schlubs get poorer doesn’t exactly make me feel sorry for them.

    Question for the Antiplanner: do you really support property taxes to pay for fire and police departments, and income taxes to pay for safety? It seems to me that you should prefer that individuals pay for their own fire and police as they see fit, and that there should be no safety net (which is essentially a means by which wealthier people are forced to help out less wealthy people).

  2. prk166 says:

    [sarcasm]Ah yes, this is what NY is missing. Surely yet another tax will turn around dieing cities like Buffalo. Even better congestion in NYC is just a subway line or three away from being solved. This will new tax will fix these things.[/sarcasm]

  3. Unowho says:

    The “millionaire’s tax” was proposed by Assemblyman Silver well before the death of Bloomberg’s toll plan this past Monday, and was taken off the table at the end of March. With the defeat of Bloomberg’s plan & by promising a share of revenue to the MTA, Silver may be able to get the tax back in the budget. BTW, the tax was strongly opposed by Bloomberg.

    It’s ironic that the failure to get CP passed in NY has taken public transit advocates off the hook: NY’s MTA is headed for the rocks without or without the new toll revenue. Sometime in the next twelve months when the MTA needs some combination of fare increase, bond bailout, or service cut to stay afloat, the Administration and the Transalt/Streetsblog crowd will be able to blame Albany for failure to give them a new revenue stream.

  4. Veddie Edder says:

    Dan, are those pre-tax figues you are citing? If so, can you explain how raising tax rates would equalize pre-tax income?

    There is a “millionaire” tax in NJ also. Amazingly, this is the name ascribed to it by the government and the media though it actually kicks in at $500,000 of household income. If you’re a plutiocrat making $500,000 (let’s say a couple of doctors or school principals), you get to pay a 9% income tax, along with the highest property taxes in the U.S. and now a 7% sales tax.

    Dan, your world must be full of mystery. You must think the entire country should be flocking to places like NY and NJ. We have ever expanding tax rates to “level” people, we abolished our death penalty so you can live your life free from fear of an unwarranted execution, we have extra crowded roads and wonderful extensive transit systems to accomodate all your travel needs, we have tons of public housing and ever expanding public school budgets. And yet these states have massive out-migration to places like Texas and Florida. The only thing keeping their populations flat is migration from abroad, while domestic outmigration has been the rule for decades. Can you imagine? This makes no sense Dan. I mean, the states the people leave for often don’t even have income taxes. It’s puzzling, Dan. Very puzzling.

    Regarding the subway line: NYC needs the second avenue subway — the real one extending from the Bronx to Hannover Square — not the stub being constructed (supposedly, I mean if I can ride this thing by 2050 I’d be shocked). The project should be privately financed and run, however. If the gov’t wants to pay money it can subsidize rides on the private system for people it feels are deserving, in much the same way that it subsidizes the grocery bills of the poor by handing out food stamps without actually having to build and run the supermarket.

  5. craig says:

    Income Confusion
    By Thomas Sowell
    Wednesday, November 21, 2007

    Anyone who follows the media has probably heard many times that the rich are getting richer, the poor are getting poorer, and incomes of the population in general are stagnating. Moreover, those who say such things can produce many statistics, including data from the Census Bureau, which seem to indicate that.

    On the other hand, income tax data recently released by the Internal Revenue Service seem to show the exact opposite: People in the bottom fifth of income-tax filers in 1996 had their incomes increase by 91 percent by 2005.

    See
    http://tinyurl.com/6b3bna

    for the rest of the story

  6. Veddie Edder says:

    I seem to have confused D4P with Dan. Apologies to all concerned. In fairness, many people confuse me with Mike McCready.

  7. MJ says:

    So, if this is really NYC’s fiscal mess, why are they asking all New York state millionaires to contribute toward the solution?

  8. D4P says:

    Why should anyone have to pay taxes to help anyone else in any situation?

  9. Veddie Edder says:

    The issue with the MTA, apart from all the fluff in the budget that comes from being a public monopoly, is that the system was nationalized specifically to keep fares down. As a result NYers pay all kinds of taxes earmarked for the MTA (something that maybe one in a hundred NYers has any idea about) so that the MTA need not look for revenue from the one source from which its gathering would be most appropriate and effective: the fare box. The MTA should stop subsidizing rides. If the gov’t wants to subsidize poor RIDERS, that’s fine by me. But people traveling on the 4 train from the upper east side to Wall Street do not need a buck subsidy on their fare. The MTA should operate flat and use its gifts from the taxpayers to enhance the system.

  10. Francis King says:

    “This reminds me of the fundraising strategy I often hear from people starting non-profit organizations. “If we could just get ten people to donate $10,000, we would have $100,000!” Or “If we could just get 1,000 people to donate $100 a year, we would have $100,000 a year!” (That’s the origin of the name “1,000 Friends of Oregon” — and last time I heard, they still haven’t found 1,000 people willing to donate $100 a year.)”

    It actually works – the repeal movement in Ireland in the 19th century had a shilling a year membership fee, one penny per month. It yielded large amounts of income. It helped, of course, that the cause was popular.

    “Yeah, tax the rich — that’s the ticket. Why didn’t anyone think of that before? After all, the rich benefit so much from mass transit, so of course they should pay its extraordinary costs.”

    The same is also, of course, true about congestion charging, where car drivers subsidise transit.

  11. johngalt says:

    D4p,
    Do you really think that the economy is a zero-sum game? Don’t you realize that people are moving from lower to middle to upper all the time? These lower and middle people are not the SAME people. Besides don’t the rich pay most of the taxes anyway?

    The wealthiest 1% of the taxpayers pay 34% of all federal income taxes. The top 50% pay 96% of the total bill. The least wealthy 50% pay almost nothing.

    The wealthy are the only group whose tax burden has increased over the past decade or two. The wealthiest one percent includes the most productive people in America-the entrepreneurs and executives who direct the course of the nation’s businesses. These people work hard, take risks and shoulder enormous responsibilities. They provide the knowledge, the entrepreneurial energy, and the investment capital that drives our economy. Yet they are vilified as idle swindlers by people like you on left–and the right, despite your claims, is too wimpy to defend them openly.

  12. Unowho says:

    Despite the failure of Bloomberg’s road tax, it’s good to see that MTA board members have the strength to carry on with their lives. Bravo, Nancy Shevell.

    BTW, NYC has issued somewhere around 150,000 parking placards; this doesn’t include cops and firefighters who can pretty much park for free around every precinct and fire house. Somehow reducing driving-incentivising (sp.?) perqs for bureaucrats got left out of PlaNYC 2030.

  13. Ettinger says:

    Most likely, the emerging mobile global citizen is becoming the nemesis of these innefective and inefficient redistribution schemes. To the extent that voters will be falling for these schemes, they will be driving their societies to economic suicide. Talent is becoming increasingly mobile and will, of course, move where it finds the most favorable conditions.

    Now, New York specifically, as weel as some other NorthEastern US states plus California (see the mental health tax in California), are ever more approaching the redistributionist policies of Europe as, ironically, Europe is making a forced attempt to move away from them.

    So, in that respect, I do not care much about NY. In a way I’m actually amused by seeing them mess up their society. The more they mess things up, the more clear the counterexample they will provide. And, of course, the more the talent who will move to low regulation, low taxation places to benefit the rest of us.

    Let the rich New Yorker refugees move into my neighborhood. Talent, and the accompanying money, are welcome.

  14. sustainibertarian says:

    Disgusting! What kind of stupid lefty nut jobs would think that people with most of the money should have to pay most of the taxes. Why wont those people with less money start paying their dues in society. Better yet, since the poor dont have the money to contribute to taxes, we could shoot the poor and feed them to the rich. PAREATYOU EFFICIENCY!

  15. MJ says:

    Sustainabertarian, that’s not very progressive. Or sustainable.

  16. MJ says:

    Ettinger,

    Some of NYC’s jet set might move out of the city into neighboring states due to the additional burden, but I agree with the AP that Manhattan’s true blue bloods are probably going to be unaffected by the tax. They bought multi-million dollar condos overlooking Central Park precisely because so few others could. It’s probably true though, that these people won’t have an unlimited amount of patience for these types of schemes. We’ll just have to see what it takes to offset their locational advantages.

  17. Ettinger says:

    I believe NY is already loosing ground to places like London and other cities as a financial center.

    Ironically, what has often happened in similar situations, is that as businesses move out, the public also becomes poorer and attempts to offset their lost standard of living by forcing the rich into more and more redistributive schemes eg. subsidies, social programs for the non rich or outright money redistibution. This accellerates the emigration of talent and thus deepens the vicious cycle of decline. In most cases, once this tipping point is reached it is almost impossible to reverse. Cities in that situation ride the curve all the way to the bottom, like, for example, Detroit. It is the typical cycle of growth and decline.

  18. Ettinger says:

    As to how people stop working when taxed, let me give you my personal anecdote:

    A few years ago, after I got married and had our first child, I stopped working at my cancer research laboratory. Why?

    Because we then lived in California and our marginal tax rate as a new family (when federal and state taxes plus loss of deductions and exemptions were accounted for) was such that almost the entire second family income was taxed at 50%. Commuting and babysitting costs would have consumed another 25%.

    So, I would have been working for 25c on the dollar. And what would I get for it? I would have been gone from the house 10-12 hours a day only being able to spend time with my child on weekends while working like a dog to give the public new cancer cures. In exchange for what? 25c to the dollar?

    So I said: dear public, you want to tax me but I’m out of here. You can cure your own cancers.

    I was the one who quit, rather than my wife, because she was working for the government and only had a few years to go before retiring. I’ve since returned to work because my wife is now retired (in her early 40’s! – I guess we ripped off taxpayers pretty well on that one) and we now live in another state.

    I am though now thinking of quitting cancer research permanently, as I am finding it more profitable to dedicate myself entirely to making money in real estate, as I have been doing on the side for quite a few years now, mostly by exploiting growth restriction regulations that the public seems to be poised to impose on themselves (BTW, I was researching how to ride and profit from the wave of upcoming growth restrictions and this is how I bumped on the AP website in February).

    But that is another story. There will be other opportunities to discuss it, as I am still hoping to get some real practical advice from this website as to where it is best to invest real estate money once this bubble settles (i.e. places that have recently imposed or are about to impose housing growth restrictions). Still, for example, I would like to find out what happened with Bismarck.

  19. johngalt says:

    sustainibertarian, everyone should pay the same portion of their income on taxes. By doing it that way the people with the most pay the most but everyone contributes. How is it fair for half the people to vote in not taxes for themselves and unending transfer payments from the other half to themselves? Come on, your smug liberal flipantness may work in your crowd but not here.

  20. sustainibertarian says:

    Come on, your smug liberal flipantness may work in your crowd but not here. Wow, I may be smug, liberal, and flipant, but at least I dont rely on name calling. While, not recently anyway! So which tactic is better? And if you dislike smugness, what are doing reading the AntiPlanner’s blog. He’s very smug about his antiplanning values and beliefs.

    How is it fair for half the people to vote in not taxes for themselves and unending transfer payments from the other half to themselves?

    While it depends on what one considers fair, doesnt it? Why is Neoliberal orthdoxy more fair than liberal orthdoxy?

  21. johngalt says:

    I guess you don’t know much about name calling. My comments were descriptive terms aimed at your post, hardly name calling.

    “Why is Neoliberal orthodoxy more fair than liberal orthodoxy?”

    It just is, pure and simple. Facts do exist, it is not just a matter of opinion.

  22. sustainibertarian says:

    Ok fine, your COMMENTS are dumb and sadistic. Not name calling – I’m being descriptive of your post and smarmy, or whatever else this will contrued as.

    Ayn Rand’s philosphy – Mr. John Galt – is all about facts, isnt it? Just like the bible is full of facts? Or maybe we are all utility maximizers, despite what evolutionary psychology or any other SCIENTIFIC assessment of human behaviour suggests. Science is what forms facts, not religio-economic-individualistic pseudo-science orthodoxy.

    Thanks. Have a great day Mr Randian.

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