How Not to Tax the Rich

There are two times in New York City government when truly dreadful ideas tend to surface: during flush times, and during a financial crisis. When city coffers are full, council members try to blow through all the cash on hand, spending it on ridiculous pork barrel projects rather than using the funds to do something smart, like pay down debt. And when the coffers are empty, bad ideas likewise become emboldened, hoping to find a breeding ground in the panic and confusion. Last week, Council Speaker Christine Quinn hurled a doozy of a bad idea into the air; we’re hoping common sense knocks this turkey down before it grows wings and thinks it can fly.

The speaker has proposed an income tax increase—from 3.683 percent to 4.25 percent—on New York households earning over $297,000 a year. Those making $532,000 to $1.2 million would see their taxes rise proportionately; there would be a similar increase on those earning over $1.2 million.

Speaker Quinn’s proposal appeals to her colleagues on the Council because it has a populist ring and, more importantly, would save members from doing the difficult work of cutting costs and controlling spending.

The Speaker’s intention to use some of the new funds to offer tax relief to low-income families is of course worthy. But the high risks of her tax increase far outweigh its advantages. The speaker is promoting a policy that will encourage households to leave the city and permanently relocate to the adjacent suburbs, taking their tax dollars with them. Indeed, by taxing the city’s most mobile population, the group with the most means to pick up and leave, the speaker risks undoing the remarkable progress the city has shown in retaining young, ambitious families over the past several years. Albany, meanwhile,  is also considering increasing the state tax burden on high earners. Do we really want to wait around and see how the city’s white collar tax base reacts to a double whammy in a recessionary economy? Furthermore, while $297,000 is a whopping sum in most of the country, there are thousands of families in New York who fight to stay here even on sizable incomes. Their commitment to the city should not be treated more lightly than lower-wage earners struggling to make ends meet.

Speaker Quinn has shown herself time and again to be a terrific public servant, with a barrel of good ideas to improve the city. This isn’t one of them.

How Not to Tax the Rich