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UFT.org Home > News > Op-eds & Letters to the Editor > Wanted: fairness in New York taxes. Close the carried-interest loophole and keep the Millionaire's Tax
Wanted: fairness in New York taxes. Close the carried-interest loophole and keep the Millionaire's Tax
by Jeffrion Aubry and Michael Mulgrew | published March 7, 2017
[This op-ed originally appeared in the Daily News on March 7, 2017.]
Any fourth-grade student understands the basic fairness principle: You don’t take more from people who have less.
Yet that fourth grader’s teacher can pay a higher tax rate on her salary than a Wall Street billionaire pays on his million-dollar hedge fund deals.
How is that fair?
Some Albany lawmakers ignore this basic fairness principle by allowing New York’s wealthiest to keep what amounts to a golden perk — the “carried interest” provision, a loophole that permits hedge funders to pay only a 20 percent tax rate on certain kinds of income.
This is well below not only the normal tax rate for their income level, but even below the 25 percent rate paid by the mechanic who fixes the executive’s car and the teacher who works with his children.
By catering to the New Yorkers who already have the most, the state loses an estimated $3.5 billion through this tax break, money that could go to neighborhood schools and libraries; that could support regional hospitals, parks and elder services; and that could get new proposals, such as free college tuition at the State University of New York, off the ground.
One of us is working with a coalition of legislators from Northeast states to close this loophole. The other is working with parents, teachers and other labor organizations to spread the word about how we can level the playing field.
Unfortunately, some Albany lawmakers want to give the state’s millionaires and billionaires — even those not eligible for the carried-interest loophole — yet another present by letting the so-called Millionaire’s Tax expire at the end of 2017.
The simple fact is, New York’s millionaires and billionaires are doing just fine.
There are more than 47,000 of them in New York, who collectively raked in more than $195 billion in income in 2014, up substantially from previous years. This small group represents less than 1% of the more than 9 million individual taxpayers, but its members got more than one-quarter of the total income in the state. Their average income is over $4 million.
The Millionaire’s Tax was created in 2009 to help New York weather the nationwide recession and to avert catastrophic cuts to schools, hospitals, roads and services. It raised taxes on the state’s top earners by two percentage points.
The tax now brings in roughly $4 billion a year. Eliminate it and that’s $4 billion New York State has to make up in other ways. Gov. Cuomo has said ordinary New Yorkers can’t afford that hit and called for the state to keep the Millionaire’s Tax.
The people of the state agree. A recent independent survey showed that nearly 75 percent of New Yorkers — including more than 60 percent of Republican respondents — approve of extending the Millionaire’s Tax.
Opponents of measures like these claim that higher taxes will send millionaires fleeing to lower tax regions. But figures from the independent Fiscal Policy Institute show that the number of seven-figure earners in New York State has grown by more than one-third since 2010, when the tax first took effect.
Why? A recent Stanford University national study found that the wealthy are less likely to move than ordinary people because “for most millionaires, getting and staying rich is intimately connected to where they live.”
Assembly Speaker Carl Heastie has said the state should not only keep it but expand it because the upper reaches of the income ladder can pay a bit more.
We need to do both. We need to extend and enhance the Millionaire’s Tax and we need to close the carried-interest loophole. By doing so, we will help New York preserve essentials like schools, hospitals and elder services, and at the same time make the tax system more fair.
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