Tax the rich? States not sure
Voters support higher taxes on the wealthy, but governors and legislatures are hesitant.
This article is by Robert Frank and Laura Saunders of The Wall Street Journal.
In the partisan fight over taxing the rich, state "millionaire's taxes" have emerged as the latest and most hotly contested battleground.
In New York, New Jersey, Maryland, Oregon and California, state governors are at war with legislatures over taxing their state's highest earners to plug revenue gaps.
Advocates of the taxes say that with the wealthy riding the recovery of stock markets and global growth, and with less fortunate Americans facing unemployment and a housing slump, the top earners can best afford to foot the government's bills. Opponents say the taxes amount to a redistribution of wealth and encourage runaway government spending.
Polls show that many voters support taxing the top 1% or 2% of earners in each state. A Marist Poll, for instance, found that 64% of New York voters support preserving New York's millionaire's tax, which hits residents of the state who earn $500,000 or more a year.
"It's very high-powered money in that you can raise a lot of revenue without affecting many voters," said Donald J. Boyd, senior fellow at the nonpartisan Rockefeller Institute of Government.
Yet so far, the calls for hiking taxes on top earners have fallen flat at governor's offices and state legislatures.
In Maryland, Gov. Martin O'Malley, a Democrat, has argued against renewing a 0.75% additional tax on incomes above $1 million. The tax was enacted in 2008 and expired this past December. At that point, Maryland's top income-tax rate reverted to 5.5%.
New Jersey's millionaire's tax, which raised the top rate to 10.75% from 8.97% for those making more than $1 million, was effective for 2009. When the legislature passed an extension in May 2010, Republican Gov. Chris Christie immediately vetoed it. This year lawmakers reintroduced legislation, but Gov. Christie has vowed to veto it if it passes.
California's top current rate of 10.3% includes an added 1% for taxpayers with incomes over $1 million. Democratic Gov. Jerry Brown has recently called for extending this tax for five years. An extension would require either a super-majority of legislators, which appears unlikely, or a public referendum, according to state tax expert David Brunori of Tax Analysts, a tax publisher.
In New York, Gov. Andrew Cuomo, a Democrat, wants to allow the 8.97% rate on incomes over $500,000 to expire. A resolution in the state Senate supports the governor's plan, although some lawmakers have called for retaining the 8.97% rate on incomes over $1 million.
In Congress last year, the House-passed health reform bill financed the measure in part by imposing a 5.4% surtax on those with incomes over $1 million, which was replaced by a Senate provision increasing hospital insurance taxes for affluent taxpayers, according to Clint Stretch at Deloitte Tax. In March, Rep. Jan Schakowsky, D- Ill, sponsored a bill imposing a 45% top income tax rate on those earning more than $1 million and a 49% top rate on those earning more than $1 billion.
Though attractive to voters and many Democratic politicians, millionaire's taxes carry risks. Because the incomes of top earners are the most volatile, such taxes are among the most unstable sources of state revenue. "In general, if there were an edict from economists, it would be that states should strive for broad bases and low rates," Boyd said.
Some also argue that special taxes on the wealthy can drive the highest earners to lower tax states. After Maryland passed its millionaire's tax, the number of residents with net taxable income of $1 million or more fell more than 30% to 4,910 in the 2008 tax year. Yet analysts say all but 2% of those million-dollar earners continued to live in Maryland, suggesting that the drop was mostly due to lower incomes during the recession.
"The problem is that, whether you have an increase or decrease in millionaires, it's difficult to prove that taxes were the cause," said David J. Rosen of New Jersey's Office of Legislative Services.
I am appalled. The rich pay plenty of taxes already--and now we're going to put a burden of raising money that they didn't spend, on pork projects courtesy of Barack Obama's ARRA, and it's the rich that are at fault?
C'mon people. Taxing the rich to within an inch of their lives just to solve a budgetary problem only increases that group's apathy for the government that they live within. Remember? No taxation without representation? How about if we appropriately tax everyone with a flat tax? Everyone pays the same percentage of their income in tax. That's appropriate taxation.
If you can't make up your shortfalls that way, do what the rest of us do--tighten your belt and stick to a budget.
The rich have so many opportunities and good tax lawyers that they seldom pay the same tax rate that the average taxpayer pays. How much is too much money? Can't the rich pony up a little more money to support the state and cities they live in? Don't they use the streets and other things maintained by their state and cities?
It is pure Bull Hockey that the rich create jobs, unless you count yacht making.
Lkessler, I would humbly submit that the very wealthy have very robust and significant representation in our system of government; hence the difficulty of raising or even maintaining their level of taxation. It's also my belief that this is also the reason that GE paid an effective taxation rate of -60%.
The solution, or one of them at least, would be to close the loopholes to the corporate tax that allow this. As far as companies that decide to move their corporate offices offshore to avoid paying taxes, (Halliburton), that's fine...don't allow them to bid on government contracts, (or award them no-bid) under the America First provision of ARRA. They don't want to pay taxes in America, fine. They aren't American companies. And we only do business with American companies.
It seems to me that there's bound to be a reason someone would pay millions of dollars to get a job that pays a couple hundred thousand. On that subject, why doesn't the matter of Legislator/Executive pay ever come up? Seems like you could fund a bunch of public radio for the cost of the last Congressional pay raise.
Tax EQUALLY ACROSS the board now that is fair and doing one thing the way it was meant to be. its a step in the right direction there are many more things to correct and do right..Stand Up for what is right and just for all... Little revolts are starting all over the world and it IS going to happen here it is just a matter of time and getting sick and tired of all the greed...Time is now to change EVERYTHING and go back to our ROOTS and what our ancestors Made and drafted our Constitution for and that was for the American People You all have amended and re worked it so badly over the years its a shame...all for Greed and none of the changes are for the better...time to start from the beginning I think!!!
It's about balance people. No, it's not smart strategy to simply tax the hell out of the rich because they are not your enemy. Rich people are not all the same, and a greedy, rich corporation is not the same as a hard-working scientist or whatever else who earned his money honestly. Also, we must be judicious in how our govt. spends money. Taxing the rich could very well backfire if it leads to out of control spending and drives them away.
I believe govt. spending needs to be streamlined so that we are only funding essential services like education, health, and safety/security of the nation. The govt. will always find ways to spend your money if they are given unlimited access to funds.
I realize that this is not a popular view, but the truth is the truth. The fact is that we don't need to raise taxes AT ALL. On ANYONE. We need to cut spending, that's all. The functions of government are supposed to be limited and enumerated in the Constitution. MOST of the things that the government does are not authorized. Read the Founding Fathers own words. They wrote more than just the Constitution. James Madison clearly states that the powers of the Federal government are to be few and defined.
I realize that this is an exercise in futility, and I don't like being a voice crying in the wilderness. But it sure is going to suck to someday be standing in the wreckage of the Republic. It will be small comfort to know that I was right.
All of you folks who are financially advantaged must now pay your fair share to help our broken government. If not, we will not have a government. To all of you governors out there who are reluctant to tax your wealthy buddies--get a clue! Many of us "little guys" do not have any money because these friends of yours took it all. You cannot get blood out of a turnip. You cannot get money out of the distitute. People are used to judging one another based on what they have, and how much they accumulate in their bank accounts. Realize that those of us who have not are equally as human as those who have. It is time to judge each other based on what we give and how we help, not on how much we take. The world can bear no more hoarding.
Copyright © 2013 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.