Legislators in nine states are proposing higher taxes for the rich to fill the growing budget gaps of the coronavirus pandemic, and the list is likely to grow, according to a legislative group.
After New Jersey passed its "millionaires tax" – an increase in the income tax rate for those earning $ 1 million or more – lawmakers in New York, California, Massachusetts, Maryland and other states renewed their efforts to increase taxes on high income earners to increase.
While some of the efforts may fail, states with billions of dollars in lost revenue are increasingly looking for high earners to pay more of the pandemic's costs and make up for lost revenue.
Democratic lawmakers argue that the rich – who largely escaped the economic hardship of the pandemic – should bear more of the cost and help those who have suffered the most. Republicans and some Democratic governors say that state-level tax hikes will only drive the rich to move to lower-tax states like Florida or Texas.
Along with New York, lawmakers in California, Illinois, Massachusetts, Maryland, Wisconsin, Hawaii, Oklahoma, and Vermont have proposed various forms of high income tax increases, according to the National Conference of State Legislatures. These states make up more than a third of the US population and nearly half of the country's millionaires, according to population data and wealth surveys.
Jackson Brainerd, senior policy specialist at the National Conference of State Legislatures, expects the tax hike movement to grow at the state level.
"As we get closer to fiscal 2021, I expect more states will try to raise taxes to close budget constraints, especially if no additional federal aid comes in," he said.
After the last financial crisis, eight states raised taxes on high earners between 2010 and 2012, he said. While some of these increases were temporary, others – the California millionaires tax – will continue to be extended.
The two biggest battlefields over taxing the rich are Illinois and New York. In Illinois, Governor JB Pritzker, a billionaire Democrat, spent more than $ 50 million of his own money to support an election in November that would allow the state to impose a progressive income tax that would tax higher incomes at a higher rate to replace the current flat state income tax rate. Billionaire hedge funder Ken Griffin has pledged $ 20 million of his own money to oppose the change. The state's problems should be addressed through spending cuts and better management.
In New York, lawmakers are proposing higher income taxes and a "billionaires tax," which tax unrealized capital gains annually on those valued at $ 1 billion or more. Many Democratic lawmakers cite New Jersey's new tax rate – now higher than New York's 8.82% rate at 10.75% – as the reason for tax increases.
Democratic governor Andrew Cuomo opposes any tax hikes for the rich, saying it will only encourage them to flee to lower tax countries. According to E.J. 36% of New York income taxes and 46% of New York income taxes. McMahon, Senior Fellow at the Empire Center for Public Policy.
New York Treasury Director Robert Mujica warned lawmakers last week that most New York millionaires and billionaires live and pay taxes in New York City, where the combined state and city tax rate is over 12.6% – higher than the new tax rate New Jersey.
"There is much debate about the state and nation's economic condition and the options that are available to New York State," Mujica said in a statement. "Let's make sure the discussions are informed."
People attend a March on Billionaires event in New York on July 17, 2020.
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