Taxing the wealthy is no longer a pipe dream
Pressure works
Welcome to a Wednesday night edition of Progress Report.
Today is tax day, and to celebrate, I’m taking a look at the various efforts to raise taxes on the wealthiest Americans. I’ll be back later this week with a ballot initiative breakdown and a heaping of good news.
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New York Gov. Kathy Hochul budged… at least a little bit.
With the state budget two weeks late and growing pressure from her left flank to raise taxes on the wealthiest New Yorkers, the governor endorsed an annual surtax on second homes in NYC worth $5 million or more. It’s estimated that the pied-à-terre tax would raise $500 million per year, and I suppose might free up a few luxury apartments that get relinquished by the obscenely wealthy and civically disengaged.
Not going to do much for the housing supply, but with a $5.4 billion budget deficit, it would raise a decent bit of change. More importantly, it’s a major philosophical concession by the governor, who has been steadfast against raising any taxes.
Why Hochul drew the line at $5 million, I’m not sure — for an idea of just how big and expensive an apartment that is, consider that you can get a remodeled two-bedroom, two-bathroom apartment in a high-end building in Manhattan for about $1 million (not that I know from personal experience). Remember, the proposal would tax these mansion apartments only if they’re somebody’s secondary residence, an apartment-mansion that sits empty for more than half the year.
We’re talking an exceedingly small number of people who would be taxed, and they can’t argue that they already contribute to the city’s tax base, given that they are not full-time residents and are exempt from income tax.
“Those who benefit from the city without living in a full-time capacity should contribute to the costs that it takes to run the city: public safety, world class parks, amenities, the roads, the subway system,” Hochul said, making exactly that appeal.
The real estate lobby was able to convince Andrew Cuomo to kill his own pied-à-terre proposal in 2019, but times have changed, to say the least.
While it’s true that some of the potential payers will probably find some accounting loophole out of the tax, there are at least some civic-minded ultra-wealthy people in the city. I recently spent a few weeks talking with a few of them about why they actually wanted to pay more taxes (or, maybe not wanted, but at least were willing, able, and thought it would be a good idea).
One of these noble elites, Morris Pearl, the board chair of Patriotic Millionaires, was the subject of this new report that I wrote and produced for More Perfect Union.
A few things really stuck out to me during our conversations (which are reflected in the interview above).
First, he was candid about his conversations with Governor Hochul, who repeats the myth that raising taxes by 2% on the richest New Yorkers would spur an exodus that would destroy the economy. As he explains, people like him (ie rich people) live in NYC because it’s where they want to live; otherwise, they’d already be living somewhere cheaper, where they can get twenty times the square footage for the same price. New York has always had its share of obscenely wealthy people, even back when their taxes were much higher (so, less than a decade ago).
A tax hike would amount to a rounding error for many of them, and that’s only if you tax capital gains and other non-income holdings.
So why are some ultra-wealthy people so outspokenly opposed to paying a bit more in taxes to do things like fund universal childcare? Pearl says that for many of them, net worth is at the core of their self-worth, and they measure their personal value by the value of their bank accounts. To use a sports analogy, they like to run up the score, even when it’s abundantly clear that they have won the ultimate prize.
We’re speaking in generalities here, and I wouldn’t want to assign motives to any one individual person based on their net worth. But I appreciated Morris’s willingness to speak out and no doubt burn some bridges in service of the public good. The video has amassed more than four million views across platforms in less than a week, and while I can’t prove the governor has seen it, I’m glad we were able to add to the escalating pressure.
Because despite what some partisans and consultants will tell you, it’s almost always a good and productive thing to pressure your own party into doing the right thing. Look at Maine, where Gov. Janet Mills has finally done an about face and blessed a millionaire tax, which passed through the legislature last week.
A centrist who has put together a largely anti-union record and vehemently opposed taxing the wealthy or businesses, Mills essentially had to approve the surcharge on income exceeding $1 million this time around, given how far she trails populist oyster farmer Graham Platner in the state’s Democratic Senate primary. To be fair, she wasn’t exactly pushed to the far left on this: Mainers voted to approve a wealth tax in 2016, only for corpulent conservative Gov. Paul LePage to repeal it in the state’s budget.
Wealth taxes are all the rage in blue cities and states these days. As detailed on our new site OnTheBallot.news, there will be a number of ballot initiatives aimed at forcing the very wealthy to pay their fair share: progressives in Washington State will have to defend the recently passed millionaire tax, which is the state’s first-ever income tax (really!). And in California, in addition to the high-profile billionaire tax battle, voters will get to decide on several creative city-based wealth taxes, specifically targeting business executives.
In June, voters in San Francisco will have a chance to enact a surcharge on companies that are worth $1 billion or more and pay their CEOs one hundred times more than the median worker in the city; the tax, sponsored by two chapters of the SEIU, would raise around $200 million per year. There’s a similar proposal in Los Angeles, where companies would get slapped with a 0.5% tax on large companies with public contracts and a CEO that takes in at least one hundred times more than the median employee.
And don’t listen to business shills or centrist scolds who tell you that these proposals will grievously damage the economy: California’s $20 an hour minimum wage for fast food workers, enacted in 2024, has had almost no appreciable impact on prices or employment. Meanwhile, take-home pay for workers in that segment has risen 11%.
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...and when the majority in Congress becomes Democratic, laws preventing the use of loopholes by corporations such as Amazon and others needs to be passed, making those who make billions and pay ZERO finally cough up their fare share. And when the moron in the White House vetos it, it needs to be overridden. It would be a shame to have to wait until 2028 when a Democrat is in the White House.