Cuomo to the 1 percent: here's a tax cut for Christmas
Dec. 8, 2011 — Good news if you are a New York family in the “one percent”: New York Governor Andrew Cuomo has given most of you a large tax cut. Indeed, if you have an adjusted gross income of $1.8 million and file a joint tax return, Governor Cuomo has engineered annual tax savings for you of $27,280 in future years. (The Cuomo tax cut for those in the highest reaches of the one percent stratosphere —joint tax filers with income above $2 million — is minor in percentage terms, only 0.15 percent lower than current rates, but would still amount to $30,000 a year for a household with $20 million in income). See the full text of the legislation.
The $1-million-a-year club is actually less than one percent
Those with adjusted gross income above $1 million represent a club more exclusive than the term “one percent” implies. As of 2008, tax filers in New York State at the level above $1 million represented only 0.6 percent of all filers, according to an analysis of data from the New York State Department of Taxation and Finance by Citizens for Tax Justice. CTJ’s tax model for 2013 estimates that those filers will still represent only 0.7 percent of all filers.
New York City’s Independent Budget Office reached similar results when analyzing returns filed by full-time New York City residents. Based on 2008 personal income tax sample data provided by the New York State Office of Tax Policy Analysis, IBO found that tax filers with incomes over $1 million in 2008 represented 0.6 percent of tax filers in that year.
Rhetorical goals versus actual results
In a written statement distributed by email to New York newspapers on Sunday, Governor Cuomo stated that a taxpayer should be treated “differently from people who make significantly more, or significantly less,” and that he “would create multiple brackets and rates increasing on a graduated basis throughout and indexed to inflation.”
He continued by saying that he would, among other things, “add high end brackets.”
But the rapid-fire changes to New York’s tax code achieved behind closed doors since then do not create permanently high brackets for the highest earners. There is a temporary tax rate — 8.82 percent — put in place for joint filers with incomes over $2 million. That compares with a rate of 8.97 percent currently paid under the surcharge that has been in place since 2009 and that was not going to be renewed past its scheduled expiration of Dec. 31 principally because of unrelenting opposition all year from the governor. In short, a modest rate decrease for all over $2 million, with no new tax rates created at the $5 million, $10 million, or even $20 million level.
The Cuomo plan works even better for joint filers with adjusted gross income between $1 million and $2 million (all part of the one percent). Their taxes go down immediately, and will be paying 6.85 percent compared to 8.97 percent they had been paying in 2009 to 2011.
That 6.85 percent marginal rate is only 0.95 percent higher than the marginal tax rate paid by the couple with taxable income of between $26,000 and $40,000.