new york

New York to Raise Income Taxes on Millionaires

Photo: Angela Weiss/AFP via Getty Images

In the past week, New York State’s Democratic lawmakers have leveraged a moderate governor weakened by credible allegations of sexual harassment to legalize weed and tax the rich.

On Monday, the New York Times reported that the State Assembly and Senate reached a tentative agreement to raise taxes on New Yorkers with income over $1 million, as part of a budget deal that could generate an additional $4.3 billion for the state, which is facing a $59 billion revenue shortfall. To do so, the state would establish two new personal-income tax brackets: 10.3 percent of income for those making between $5 million and $25 million, and 10.9 percent of income for those making over $25 million. (These rates would expire by the end of 2027.) The plan also involves increasing the personal income tax for individuals making over $1 million, and joint filers making over $2 million, to 9.65 percent from 8.82 percent.

If the new rates are approved, New York City residents making over $5 million would pay the highest combined local income tax rate in the nation: Together with the city’s top income tax bracket of 3.88 percent, these high-earners would be taxed between 13.5 percent to 14.8 percent, which is higher that California’s top marginal income tax rate of 13.3 percent.

Other changes in the nearly completed budget deal, which was supposed to be wrapped up by April 1, include a reported increase to the corporate franchise tax rate from 6.5 percent to 7.25 percent for large firms; the potential for building a casino in New York City as soon as 2023; and the legalization of mobile sports betting, which could bring in an additional $500 million in new tax revenue.

While the moderate Governor Andrew Cuomo has been reluctant to raise the state income tax in the past, Democratic supermajority control of the legislature, combined with the economic disaster of the pandemic — and his own desire to distract from allegations of sexual misconduct and covering up coronavirus deaths in nursing homes — has opened up a path for the tax increase. And while that mix of political and economic variables is unique to New York, efforts to increase taxes are underway in Democratic-controlled states including California, which is considering a wealth tax; Minnesota, where Governor Tim Walz has proposed a new top income tax bracket; and Washington state, where the senate recently approved a 7 percent tax on capital gains of more than $250,000.

Tax increases are gaining momentum at the federal level as well, as President Biden hopes to implement a corporate tax increase to pay for his infrastructure bill, boosting the rate from 21 percent to 28 percent; prior to the 2017 Trump tax cut, the rate was at 35 percent. “You have 51 or 52 corporations of the Fortune 500 haven’t paid a single penny in taxes for three years,” Biden said on Monday, adding a characteristic “come on, man.”

New York to Raise Income Taxes on Millionaires