Temporary surcharge on income over $250,000 would generate $8 billion, to be shared by New York State and City
New York, NY – On the heels of the extension of the Bush-era tax cuts, members of the New York City Council Progressive Caucus today issued a plan for an income tax surcharge on households earning over $250,000. The surcharge would be set at the same amount as the additional income tax break the wealthiest households will receive under the tax cut plan. The Caucus plan would generate $8.1 billion, and use this revenue to restore vital services now proposed for deep cuts, stimulate the New York economy, and address severe deficits facing New York City and State.
The extension of the Bush-era tax breaks for the top 2% of American households comes as New York City and State (like other cities and state around the country) are facing dire cuts and gaping deficits. Mayor Bloomberg is proposing to lay off 4,000 teachers, reduce the NYPD and FDNY through attrition, cut home-care services for seniors and child care for families. Yet despite these proposed cuts, as well as new fees for FDNY emergency service, a large deficit would remain. And the budget gap New York State is facing is even bigger. The Progressive Caucus proposal would narrow these gaps, prevent harmful cuts, and help revitalize New York’s economy.
Income concentration is growing in New York, but the top 1% of households do not pay their fair share. According to a recent report from the Fiscal Policy Institute, the wealthiest 1% increased their share of income from 19.6% in 1990 to a staggering 44% in 2007. Yet they only pay 34% of the City’s income, property, and sales taxes.
Under the proposal offered today by the Progressive Caucus:
- Households earning under $250,000 (or individuals under $200,000) will receive the full tax relief under the federal package. A married couple with two kids earning $50,000 will continue to receive about $2,000 in tax relief.
- Households earning over $250,000 would still receive tax relief on the first $250,000. A surcharge would be placed on income over $250,000, per President Obama’s original proposal. A married couple with no kids, earning $500,000 per year, would still receive $7,000 in tax relief, but would no longer receive the extra $3,000 provided by the federal extension.
- This income tax surcharge will be repealed when Congress and the President repeal the tax breaks for the wealthiest households.
The proposal would generate approximately $8.1 billion. The Caucus also proposed a revenue sharing formula, to share the new revenue between New York State, New York City, and other municipalities.
With this plan, New York City would prevent 4,000 teacher layoffs, maintain police and fire services at current levels, keep libraries and child care centers open, and substantially reduce its deficit.
The plan would need to be adopted by the New York State Legislature, as the City of New York does not have the power to raise income taxes. The Caucus called on Governor-elect Cuomo, state legislators, and Mayor Bloomberg to support the proposal.
“The vast majority of New Yorkers agree – extending the Bush-era tax cuts for the very wealthiest household is terrible public policy,” said Councilmember Brad Lander, Progressive Caucus Co-chair. “It will cause us to borrow billions, do little to stimulate the economy, and increase the deficit in order to put more money in the pockets of millionaires. Our plan dedicates that tax windfall to prevent massive cuts to schools and seniors, to stimulate the economy, and to reduce state and city deficits.”
“New York is now among the most unequal cities in the nation,” said Council Member Melissa Mark-Viverito, Progressive Caucus Co-chair. “This inequality will only become more severe as a result of the deep cuts and austerity measures proposed by the Bloomberg administration and Governor-elect Cuomo. Now is the time for a temporary income tax surcharge on the wealthiest New Yorkers. A continuation of the status quo at the federal level should not stop the City and State from making our tax system more progressive.”
“We cannot afford to extend Bush-era tax breaks for millionaires on the backs of hard working Americans,” said Council Member Jimmy Van Bramer. “Let’s not continue an antiquated and flawed policy that clearly isn’t in the best interest of working-class Americans. There is no reason why millionaires should be pocketing unneeded tax breaks when thousands of jobs can be saved with this potential revenue.”
“Even with this proposal there will still be plenty of tough choices and spending cuts to be made,” said Council Member Jumaane Williams. “But there will be fewer really disastrous consequences, like rising crime, or cheating kids out of early childhood education. We will prevent further massive layoffs and reduce the risk of a double-dip recession. And we’ll get a very modestly fairer tax system to boot.”