Transcript Fair Share Tax Reform

Fair Share Tax Reform
1
To address the worst economic crisis
in 70 years, we need real shared
sacrifice.
Prudent Spending Cuts
Federal Aid
A Fairer Taxation System
2
Just cutting spending will devastate
the poor and middle class and
exacerbate the economic crisis
 Massive cuts will gut critical public services
 Cuts are the worst possible response to the
current economic crisis
"When faced with such an unpleasant choice,
economic theory and evidence gives a clear
and unambiguous answer: it is economically
preferable to raise taxes on those with high
incomes than to cut state expenditures."
- Joseph Stiglitz, 2001 recipient, Nobel
Prize in Economics
4
The present shortfall is compounded by
years of high-end PIT cuts
Source: Fiscal Policy Institute
NY has cut its top PIT rate by more than 50% over
the last 30 years - from 15.375% to 6.85%
5
Two decades of tax cuts have
resulted in $20 Billion of Lost
Revenue in 2008-2009
Source: Fiscal Policy Institute
6
Totally unfair: wildly different
incomes, same flat tax rate
 The average New York teacher
earns $62,332…
Her marginal tax rate =
6.85%
 Jamie Dimon, Chairman and CEO
of JP Morgan & Chase, made
$44 million last year…
His marginal tax rate =
6.85%
7
The Result – A Massive Tax Shift
 New York has made up for lost income tax revenue
by raising local taxes—property, sales and excise—
that hit working and middle-class families the hardest
 New York is now second in the nation, behind only
Texas, in local tax burden
 If New York had indexed its tax brackets and
personal exemption to inflation rather than cut from
the top, 95% of New Yorkers would be paying lower
income taxes and the State would have $8 billion of
more revenue a year.
8
The result – a Regressive Tax System
Source: Institute on Taxation and Economic Policy
Those with the least income
carry the highest tax burdens
9
How do we solve the current
crisis?
The Governor has proposed massive
program cuts and 137 new or increased
taxes and fees, almost all regressive
or…
10
A fairer and more economically
sound alternative: Fair Share Tax
Reform (FSTR)
 Fair share tax reform would
 Mitigate human impact of devastating cuts
 Mitigate negative economic effect of state spending
cuts
 Raise approximately $6.0 billion
 Begin restoring fairness to the tax structure
11
Gov. Paterson’s budget proposal would
increase the state’s reliance on regressive
taxes, even as it guts services
The budget proposes increases in the sales tax
on several products and services, which already
hit working families the hardest….
Source: Institute on Taxation and Economic Policy
12
FSTR treats the disease, not the
symptom
 Yes, this year’s budget crisis is extraordinary. But chronic budget
deficits require a permanent solution
 Permanent PIT reform will help eliminate the deficit now and in the
long run provide revenue to cut property and sales taxes that hit
working and middle class families the hardest
 In New York, local revenues (mainly property and sales taxes)
produce 54% of all revenues (compared to the 40% national avg.)
 For 95% of New Yorkers, property and sales taxes make up the
majority of their total tax burden
 Middle and working class New Yorkers need property and sales tax
relief – not income tax relief
13
The Fair Share Tax Reform Plan
Fair Share Tax Reform Model
Income
Brackets
New
# of NYS % of NYS
Rate
New Tax
Revenue
% of New
Taxfilers Taxfilers Increase Rates (thousands) Revenue
Above
$250,000
189,256
2.0%
1.40%
8.25%
567,954
9.50%
Above
$500,000
73,649
0.8%
2.12%
8.97%
823,425
13.80%
Above
$1,000,000
57,162
0.6%
3.45%
10.30%
4,590,431
76.70%
TOTAL
320,067
3.5%
$6.0bn
100.00%
Source: Fiscal Policy Institute, Department of Taxation and Finance
14
How Fair Share Tax Reform Would Work
A New Yorker making 1% of Jamie
Dimon’s salary, or $440,000 a year would
be paying an additional $126 per week.
Don’t forget that state income
taxes are deductible against
federal income tax…
Weekly Cost
of Increase
Annual Cost
After Average
Federal
Deductions*
Taxable
Income
Weekly
Income
Additional
Taxes Under
New Plan
$300,000
$5,769
$4,597
$88
$3,678
$71
$440,000
$8,462
$6,557
$126
$5,246
$101
$550,000
$10,577
$12,057
$232
$9,646
$186
$2,000,000
$38,462
$69,397
$1,335
$55,518
$1,068
The new rates intend to keep New
York competitive with states in
the region and those with
comparable economies
State
Top Rate
New Jersey
8.97% > $500,000
California
10.3% > $1,000,000
Weekly Cost
After Federal
Deductions
15
And – new tax rates don’t fully start
at $250,000!
 New rates apply to “taxable income” AFTER Federal and
State adjustments from gross income
 Adjustments include: NYS/NYC income tax offset,
mortgage, charitable and standard deductions, student
loans etc
 This means New York taxpayers must be making
significantly more than $250,000 per year to face fully
paying the first new tax rate
16
On average, a tax filer may need to
make over $315,000 of gross income
before fully paying the new tax rate…
Gross
Income
Federal
Adjusted
Gross
Income
NYS Adjusted
Gross Income
NYS Taxable
Income
Annual Increase
Under FSTR
$261,860
$255,225
$249,000
$230,125
$0
$263,707
$257,526
$251,000
$232,250
$65*
$314,605
$307,923
$301,000
$282,250
$3,952
This slight increase is due to the "tax table recapture", which applies new rates gradually on
AGI between $250k-$300k
Source: Fiscal Policy Institute
17
Why start @ $250,000?
…Fairness & Fiscal Sense
 Raises adequate revenue ($6.0bn) to minimize cuts
 Targets tax increases only at those able to afford them (top 3.5%)
 Brings tax system up to date with today’s skewed income
distribution (in 2007, the top 5% of New Yorkers captured 47% of
all income)
 Is least harmful option to economic recovery (by taxing income
most likely to remain in savings)
 Enjoys overwhelming public support (which drops almost 30% at
$150,000 start, Kiley Poll, 11/08)
18
Higher Rates in Other States
State
Top Rate on Single
Filers
State
Top Rate on Single
Filers
California
10.3% > $1,000,000
Hawaii
8.25% >
$48,000
Rhode Island
9.9% > $357,700
North Carolina 7.75% >
$60,000
Vermont
9.5% > $357,700
Minnesota
7.85% >
$74,650
Oregon
9%
Idaho
7.8%
>
$24,763
Iowa
8.98% > $63,315
South Carolina 7%
>
$13,150
New Jersey
8.97% > $500,000
Arkansas
7%
>
$30,100
Washington DC
8.7%
> $40,000
Montana
6.9%
>
$15,600
Maine
8.5%
> $18,950
New York
6.85%
>
$20,000
Source: Tax Foundation
> $7,600
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Fair Share Tax Reform would
benefit Upstate
 Permanent PIT reform
will provide more funds
for local services,
lowering the undue
property tax burden of
Upstate New Yorkers
 This would help the
Upstate economy
 Only 1% of Upstate tax
filers would be affected
20
How will it affect small business?
 While small businesses are essential to the state’s economic vitality,
most have median annual incomes far below $250,000
 Most small business owners will benefit from reduced pressure to
raise local property and sales taxes
 Cuts to public spending would be harmful to economic growth
 The Center for Economic Policy and Research estimates that if
cuts comprise 40% of NY’s deficit plan, the State could lose over
8,000 jobs in FY 2009 and 68,400 jobs in FY 2010
 PIT increases in other states have not led to job losses
 In 2003-2005, NY created 127,000 jobs
 From 2000-2008, CA experienced a 3.16% increase in private
sector employment
21
Will the Rich Leave?
Common statement: PIT increases
will cause wealthy residents to
move away resulting in job loss,
reduced tax base, and overall
economic harm
Migration patterns are influenced
by a variety of factors, including
availability of vital public services
such as education, public safety,
and access to healthcare
While the political rhetoric is
catchy, it is not supported by the
evidence
22
Will the Rich Leave: Evidence
New Jersey
In 2004, Passed a new top rate of
8.97% over $500K
 A Princeton University report found the increase
had ““little effect on migration patterns among half
millionaire households.”
 The number of half-millionaires has grown by 70%
following the increase
23
Will the Rich Leave: Evidence
California
 In 2004, passed a new rate of 10.3% over $1,000,000
 The California Tax Reform Association concluded, “[t]here is no
credible…data which demonstrates…any loss to the General
Fund resulting from changes in behavior…among high-income
taxpayers with regard to location…(due to) increases in
marginal tax rates at the upper end.”
 The California Budget Project found that since the increase the number
of millionaires increased 37.8%
New York
 From 2003-2005, NYS employed two new rates of 7.25% over $100K
and 7.7% over $500K
 The Fiscal Policy Institute found the number of millionaires grew by
30%
24
Polls consistently show support
for a high-end PIT increase…
 Siena Poll, 3/08: 72% of respondents supported a
tax surcharge on those making over a million dollars
annually
 Siena Poll, 10/08: 69% of likely voters preferred
increasing the income tax on millionaires
 Kiley & Company, 11/08: 75% of voters prefer
increasing taxes on income earners over $200,000
 Quinnipiac University, 1/09: 80% support for a
millionaire tax
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Especially when it helps avoid
cuts to public services
 When voters are offered a choice between making major budget
cuts or increasing taxes on households making over $200,000:
 78% favor high-end income tax increases over cuts in state aid
to public schools
 78% favor high-end income tax increases over cuts in state
funding for hospitals, nursing homes, and home healthcare
services
 Proposed high-end tax increases enjoy widespread support
throughout every region of the State
 78% of New York City voters
 67% of Suburban voters
 87% of Upstate East voters
 70% of Upstate West voters
 Source: Kiley & Company, 11/08
26
Let’s not “waste this crisis…”
 FSTR is the best short-term solution to an
economic crisis of historic dimensions
 FSTR is the best long-term approach to
remedying the state’s chronic fiscal shortfalls,
restoring fairness to the state’s tax system,
and supporting services critical to the needs
of New York’s poor and working people
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One New York:
Fighting for Fairness Coalition
1199SEIU Child Care Corporation ● ACORN ●Advocates for Children ● AIDS Community Services of Western New York ● AIDS-Related Community Services,
(ARCS) ● AIM Independent Living Center ● Alliance for Quality Education ● APEX ● APICHA ● ARISE Coalition ● Asian American Federation ● Asian Youth
Center of New York ● Association to Benefit Children ● Barrier Free Living ● Black Equity Alliance ● Brooklyn Center for Independence of the Disabled ●
CAMBA ● Campaign for Fiscal Equity ● Canaan Senior Service Center ● Cathedral Community Cares ● Center of AIDS Outreach and Prevention ● Center for
Independence of the Disabled, NY ● Chhaya Community Development Corporation ● Child Care Council - CUNY ● Child Care Inc. ● Children's Aid Society ●
Chinatown Manpower Project ● Citizen Action of NY ● Citizens Advice Bureau ● Citizens Committee for Children of New York ● Citywide Council on High
Schools ● Class Size Matters ● Coalition for a District Alternative ● Coalition for After School Funding ● Coalition for Asian American Children and Families ●
Coalition for Educational Excellence for English Language Learners ● Coalition for the Homeless ● Coalition of Behavioral Health Agencies ● College of Mount
Saint Vincent - Institute for Immigrant Concerns ● Commission on the Public's Health System ● Community Access ● Community Board 7, Manhattan ●
Community Board 11, Manhattan ● Community Health Care Association of New York State ● Community Voices Heard ● Comunilife, Inc. ● Connect, Inc. ●
Connecting to Advantages ● Council of Family and Child Caring Agencies ● Council of Senior Centers and Services of New York City, Inc. ● Cypress Hills Child
Care Corporation ● Cypress Hills Local Development Corporation ● Damayan Migrant Workers Association ● Day Care Council of New York, Inc. ● District
Council 37, AFSCME, AFL-CIO ● District Council 37, Local 1549, AFSCME ● East Side House Settlement ● Economic Justice and Social Welfare Network ●
Education Voters of New York ● Educational Alliance ● Empire Justice Center ● Empire State Economic Security Campaign ● Episcopal Social Services ●
Erasmus Neighborhood Federation ● Family Justice ● Federation of Protestant Welfare Agencies ● FEGS ● Fiscal Policy Institute ● Fifth Avenue Committee
● Flanbwayan Haitian Literacy Project/Haitian Women for Haitian Refugees ● Freedom Community Center ● Friends and Relatives of Institutionalized Aged,
Inc. ● Gay Men's Health Crisis ● Goddard Riverside Community Center ● Good Jobs New York ● Grand Street Settlement House ● Gray Panthers, NYC
Network Greater ● Chinatown Community Association ● Haitian Americans United for Progress ● Hamilton-Madison House ● HANAC, Inc. ● Harlem
Independent Living Center ● Harlem United Community AIDS Center, Inc. ● Henry Street Settlement ● Highbridge Community Life Center ● Hispanic AIDS
Forum, Inc. ● Hispanic Federation of New York State ● Hispanic Senior Action Counsel ● HIV Law Project, Inc. ● Homeless Services United ● Housing Works
● Hudson Guild ● Human Services Council ● Hunger Action Network of New York State ● Immigrant Social Services, Inc. ● Indonesia Sino-American
Community Center ● Institute for Community Living ● Institute for the Puerto Rican/Hispanic Elderly, Inc. ● Internationals Network for Public Schools ●
Isabella Geriatric Center ● Jamaica Service Program for Older Adults ● Jewish Child Care Association ● Joint Public Affairs Committee for Older Adults (JPAC)
● Korean American Family Service Center ● Korean Community Services of Metropolitan New York, Inc. ● Korean Family Counseling and Research Center ●
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Campaign ● MFY Legal Services ● Midwood Development Corp. ● Mosholu Montefiore Community Center ● NAACP Metropolitan Council ● National
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Neighborhood Family Services Coalition ● New Settlement Apartments ● New York AIDS Coalition ● New York Citizens' Committee on Aging, Inc. ● New York
City Central Labor Council ● New York Childrens Action Network ● New York City Employment and Training Coalition ● New York Civic Participation Project/
32BJ ● New York Coalition for Adult Literacy ● New York Committee for Occupational Safety and Health ● New York Counties Registered Nurses Association ●
New York Immigrant Coalition ● New York State Coalition for School Based Health Center ● New York State NAACP ● New York State Nurses Association ●
New Yorkers for Fiscal Fairness ● NY Jobs with Justice ● New York City AIDS Housing Network ● NYC Coalition for Educational Justice ● New York State Child
Care Coordinating Council ● New York State Public Employees Federation, Region 10 ● New Yorkers for Fiscal Fairness ● Nonprofit Coordinating Committee of
New York ● One Stop Senior Services ● Palladia, Inc. ● Partnership For The Homeless ● Phipps Community Development Corporation ● Pratt Center for
Community Development ● Professional Staff Congress - CUNY ● Project FIND ● Project Renewal ● Safe Horizon ● SCAN-New York ● Schuyler Center for
Analysis and Advocacy ● SEIU Local 32BJ ● Service Program for Older People, Inc. ● Sky Light Center, Inc. ● South Asian Council For Social Services ●
South Asian Youth Action ● Stanley M. Isaacs Neighborhood Center, Inc. ● Staten Island Inter-Agency Council for the Aging ● Staten Island Legal Services ●
Strycker's Bay Neighborhood Council, Inc. ● Supportive Housing Network of New York ● Tenants Political Action Committee ● The After-School Corporation ●
The AIDS Council of Northeastern New York ● The Arab-American Family Support Center ● The Bridge Inc. ● The Bronx Health Link ● The Center for Arts
Education ● The Center for Law and Social Justice, Medgar Evers College- CUNY ● The Children's Village ● The Committee for Hispanic Children and Families,
Inc. ● The Bridge Inc. ● The Fortune Society ● The Geriatric Mental Health Alliance of New York ● The International Center in New York ● The Muslim
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the Sciences Chapter ● United Chinese Association of Brooklyn ● United Community Centers, Inc. ● United Federation of Teachers ● United Neighborhood
Houses ● University Settlement Society ● Urban Justice Center ● Urban Pathways, Inc. ● Village Care of New York ● Violence Intervention Program, Inc. ●
VIP Community Services ● Welfare Reform Network ● Welfare Rights Initiative ● West Side Campaign Against Hunger ● Westchester Disabled On the Move28
Inc. ● Women's Housing and Economic Development Corporation ● Working Families Party ● YKASEC-Empowering the Korean American Community ● YWCA