New York Governor Andrew Cuomo practically begged the rich to return to the city last year.
“‘We’ll go to dinner, I’ll buy you a drink, come over, I’ll cook,’” he said in August.
The offer still stands, but the embattled politician now expects them to pick up more of the tab.
State lawmakers and Cuomo reached an agreement to raise taxes as part of a $212 billion budget deal announced on Tuesday.
Under the deal, the top tax rate would temporarily increase to 9.65% from 8.82% for single filers earning more than $1.1 million. Income between $5 million and $25 million would be taxed at 10.3% and for more than $25 million it would be 10.9%. The new rates would expire in 2027.
With New York City residents also paying city taxes, the combined top rate for the highest earners would be between 13.5% and 14.8%, surpassing the 13.3% rate in California, currently the highest in the nation, according to the Tax Foundation.
Overall, experts say the increases, along with federal levies, would mean that the richest New Yorkers would be hit with a combined marginal rate of 51.8% — higher than levels in some European countries.
“Employers and employees alike are increasingly mobile, and raising taxes on newly mobile taxpayers is a risky proposition,” said Jared Walczak, the vice president of State Projects at the conservative Tax Foundation. “High earners in particular have considerable flexibility, and many already temporarily relocated during the pandemic. Raising tax rates on the most mobile cohort of taxpayers is a good way to lose many of them outright.”
New York’s move is the latest attempt to target the wealthy in the U.S. to fund budget shortfalls or future spending. The nation's richest people continued to reap financial gains even as the Covid-19 pandemic wrecked parts of the economy. American billionaire wealth increased $1.3 trillion in the 11 months since mid-March 2020, an increase of 44%, according to data from the Institute for Policy Studies, at a time when much of the world grappled with soaring unemployment and financial distress.
Americans earning more than $400,000 a year are already bracing for higher federal taxes from the Biden administration, which has also proposed raising the corporate levy to 28% from 21%.
Increasing levies at the state level though brings a different dynamic.
Prior to Covid-19, there were concerns that residents would leave when a tax overhaul passed by Republicans and signed by President Trump in 2017 capped state and local tax deductions at $10,000.
In a press briefing Wednesday, Cuomo said he expects the tax increases in his state budget deal to be offset by a repeal of the federal cap on state and local tax deductions. When that happens, net taxes will be 37% lower, he said.