STATES TRY TO TAP HIGH EARNERS
April 2, 2009
The governor and Democratic lawmakers in New York will attempt to patch an $18 billion budget deficit by imposing much higher taxes on the richest residents, joining several states considering such a move this year, says the Wall Street Journal.
- Under a proposal by Gov. David Paterson, New York would follow California and Maryland in pushing its top earners into higher tax brackets that are several percentage points more than what most earners pay.
- And New Jersey is considering raising its top-tier income taxes even higher, to more than 10 percent compared with the 5.25 percent marginal rate paid by most households.
Critics say the planned increase wouldn't hit just those in the financial industry. Small-business owners in New York are especially piqued, business groups say. Many report their business earnings on their personal income-tax returns and fear the additional tax load will constrict their enterprises. "You eliminate their ability to hire new employees, buy equipment, finance an expansion," said Mike Elmendorf, state director of the National Federation of Independent Businesses.
- To seal a $132 billion budget, Paterson has called for raising the marginal tax rate to 7.85 percent for three years for single filers who earn $200,000 to $500,000 as well as married couples whose combined earnings total $300,000 to $500,000.
- A new 8.97 percent tax bracket would be levied on filers with $500,000 of taxable income.
- The state's tax rate is 6.85 percent for everyone who earns more than $40,000.
- New York City levies a 3.6 percent marginal rate for earnings over $90,000.
Several states are considering similar solutions as they face diminished revenue, yawning budget gaps and a populist political climate, says the Journal:
- New Jersey is considering boosting for one year the tax on top earners to 10.25 percent from 8.97 percent; the proposal would provide an estimated $620 million to help close a $7 billion shortfall, said Thomas Vincz, a spokesman for the state treasury.
- California already has a 10.3 percent tax on incomes above $1 million; the governor and Legislature agreed in February to raise the tax on all brackets by .25 percentage point in an effort to close a $42 billion deficit.
- Maryland added a new 6.25 percent tax bracket for those with incomes of over $1 million, last year; other states are taking note: Wisconsin's governor has pitched a new tax bracket for individuals making more than $225,000 a year or couples making $300,000 and Delaware's governor has suggested raising taxes on those who make more than $60,000 by one percentage point, to 6.95 percent.
Source: Suzanne Sataline and Leslie Eaton, "States Try to Tap High Earners," Wall Street Journal, April 1, 2009.
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