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Tax the rich? States not sure

Voters support higher taxes on the wealthy, but governors and legislatures are hesitant.

By MSN Money Partner Mar 30, 2011 6:01PM

This article is by Robert Frank and Laura Saunders of The Wall Street Journal.


Wall Street Journal on MSN Money
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.


More from The Wall Street Journal and MSN Money:


Mar 30, 2011 6:41PM
Leave the individuals out of it.  Tax the pee out of corporate "persons".  One great affect of that would be corporations havingless money for undue and unhealthy influence.  Pay the workers or pay the taxes.  You can't shirk on both.
Mar 30, 2011 6:44PM

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. 

Mar 30, 2011 6:45PM

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.

Mar 30, 2011 6:51PM
Tax the Rich..does that mean everyone EXCEPT GE?
please, please, raise the taxes on the rich in your states, then they will move to Montana, and we can resume the building boom of high end custom homes, being an out of work contractor sucks big time
Mar 30, 2011 6:57PM
Tax the hell out of the rich. They are rich because they've outsourced American jobs to low wage countries which has made them even richer. No sympathy for them , they like living in this country they don't need to be responsible for it's decay. Make them pay.
Mar 30, 2011 6:58PM
Can this be happening?
Obama is NOT  taxing GE>
They only made $150 billion last year!
Mar 30, 2011 7:08PM

  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. 

Mar 30, 2011 7:09PM
Do You Really think Gvt is going to tax their rich Friends? comon folks the Rich pay less taxes then everyone because of the loop holes they have built into the system,No Big Business pays taxes,They all keep their money overseas and do not have to pay taxes on the profits made there so they invest more there and forget they live in America and this country is falling fast and going to be taken over by some third world country and we are going to have no one but our Big Businesses,Rich People,and our Own Government to blame,We Elected them one certian promises each and every year and each and every year they screw the American people. all I can say is we are all going to meet our maker and have to answer to him and that time is approaching rapidly believe it or not!!! What a thing to be the President of the most powerful country in the world and teach your own Children its ok to say one thing yet do another and hurt millions of people in the process, all over greed and the mighty dollar..Sad that our Leaders have all put Satin first.Its not too late the right things still can be undone but will any of them do it before it is too late... Think about it and look what is happening all over the Globe... Just what God said is going to happen and that was thousands of years ago....
Mar 30, 2011 7:13PM
Why is it you people want to tax those individuals that have worked hard and become a success? Are you that jealous? Is your life so bad that you need to seek out revenge through taxation? What if you had studied hard, worked your tail off and got lucky enough to become wealthy, would you want me to come along and subject you to obscene taxation? 
I bet not.
Mar 30, 2011 7:15PM
Mar 30, 2011 7:19PM
All you people saying tax the rich must all be bums and democrats! this country was founded on work hard save and get ahead, not what its become now a welfare country where everyone wants something for free. The government spends too much so punish the people that work hard and get ahead...haha...what next do you really think the " rich" wont just raise the prices to cover that? didnt anyone watch 60 min sunday....the companys are going over seas because the tax rate is to high  here and other countries are willing to give loower taxes. and with the companys goes the jobs and the taxes from the companys and the workers....wake up its the government spending to much
Mar 30, 2011 7:19PM
Anything but flat tax is FAVORITISM!
Mar 30, 2011 7:21PM
they got rich by taking advantage of tax loopholes, and those corporations that  promised job creation for getting tax breaks should have to pay back with interest if they havent delivered on their promises. as far as taxing wealthy individuals the argument has always been that they spend money which helps the economy. trickle down economics don't work when all the jobs have gone overseas. they don't buy american products. i would support a flat tax whole heartedly
Mar 30, 2011 7:22PM
no I am not crazy in the slightest just saying Greed is running this country and its time the American people actually stuck together and said enough is enough...kick all the non legals out close the borders,Tax Equally across the board.Tell others Countries screw you were done doing for you and protecting you at the cost of our own men and women,we have our own oil and were using it...But will they let Americans drill and use what is ours?? NO because OPEC,Big Business says no . WE do not need to be dependent on any other Country for anything so tell me WHY ARE WE???? WAKE UP AMERICANS Your Country is Slipping away and quite quickly.
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!!!

Mar 30, 2011 7:32PM

One i work hard hours  98 a week at an oil plant. I make good money yet i work long hours. Even if they raised my taxes i still think in order for this country to get better they need to tax people that make more than 1 million a year. Any one that wants same tax across the board is an idiot. A person that makes 50k-100k which considered middle class income will feel the tax, meaning they need that money. A person that makes 1million or more and gets tax higher still has a hell of a lot more money left.

 The way to fix this problem is to kick all the damn lobbyist out of washington, tax the rich and elect people that don't have ties to big business. 
Mar 30, 2011 7:32PM
Stop bashing rich people!  Goodness folks, you're lumping them all into a few bad people.  Most people who are rich these days *worked* for it (think Oprah, the founder of Burt's Bees, EBay, Microsoft, etc.) - and if people inherited their wealth, well, you're just jealous!  

As for those complaining about companies sending jobs overseas - have you ever bought something made in China?  How about gone to Walmart?  If you answered 'yes' to either of those questions, then the reasons jobs are overseas is YOU!  Instead of being willing to pay a fair price for an item made in the Good 'Ol USA you decided to be cheap and save a few pennies buy buying something made overseas.  The jobs went there due to price competition, fools!  With higher wages, taxes and regulations here American companies have to charge more to make a profit.  Pay it, or suffer.  Well, you cheapskates . . . here we are, now quit complaining and leave the rich alone - your hand does not belong in their pocket, thief!
Mar 30, 2011 7:38PM

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.

Mar 30, 2011 7:39PM

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.

Mar 30, 2011 7:39PM

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.


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