Tuesday, October 13, 2009

Incomes Equalizing In New York

From this report of around November 2008 comes a look at how income inequality is working in New York.

But the redistributionist argument is at best a half-truth. The larger truth is that much of the income of the rich and well-to-do comes from what they do. If they stop doing it, then the income and wealth vanish. No one gets it. It can't be redistributed because it doesn't exist. Everyone's poorer.

This isn't just theory. Last week, New York Gov. David Paterson pleaded with Congress to provide emergency aid to states. Heavily dependent on Wall Street for taxes, he testified, New York faces a $12.5 billion budget deficit next year and expects joblessness to rise by 160,000. Wall Street bonuses will drop by 43 percent and capital gains income by 35 percent, he estimated. People in New York would be better off if the securities industry were still booming, even if there were more economic inequality.
He may have to do some more pleading

Being a really smart Democrat Governor Patterson raised taxes on the rich. With the usual result.
Now, a half-dozen states in this recession-driven movement are nervously eyeing New York to see if it's wise to demand so much from people rich enough to have a second home in less taxing states — and for whom a change of address can be its own tax break.

Early data from New York show the higher tax rates for the wealthy have yielded lower-than-expected state wealth. Gov. David Paterson, who had always warned targeting the rich could backfire, fears that's just what happened.

Paterson said last week that revenues from the income tax increases and other taxes enacted in April are running about 20 percent less than anticipated.

The concern about millionaire flight has prompted some states, including New York, New Jersey and California, to increase the highest tax rates only temporarily. For New York, it's the second temporary increase for high earners since 2001.
And they are flying alright.

Florida looks like a nice destination.
State officials say they don't know how much of the missing revenue is because any wealthy New Yorkers simply left.

But at least two high-profile defectors have sounded off on the tax changes: Buffalo Sabres owner Tom Golisano, the billionaire who ran for governor three times and who was paying $13,000 a day in New York income taxes, and radio talk-show host Rush Limbaugh. Golisano changed his official address to Florida, and Limbaugh, who also has a Florida home, announced earlier this year that he was relinquishing his home in Manhattan.

Donald Trump told Fox News earlier this year that several of his millionaire friends were talking about leaving the state over the latest taxes.

Golisano, who created 5,000 jobs from his Rochester payroll processing company, Paychex, bristled when politicians said he was bailing on New York in the spring.

"If anything, New York state has bailed out on us," he said.
And don't kid yourself. The state knows exactly what these new wallet grabs are costing them. They just can't say because then people would know just how stupid the people running the government are.

3 comments:

snakeoilbaron said...

Politicians are complaining about wealthy people "bailing" on New York? That sounds like muggers calling people turncoats for moving out of the neighborhood.

I saw a graph recently of government spending against GDP for the US (though I suspect it is worse for other nations). Except for a spike at each of the world wars and a bit of a steeper patch at the great depression, the trend is unmistakable and you can't even really see where different administrations entered and left. Even as GDP expanded fantastically, government spending always increased a bit more. I think all government spending at all three levels is still below fifty percent of GDP but for how much longer? And how much higher can it go? Based on the slope it might take decades before government spending excedes GDP but things would probably not be able to get that far before taxing and borrowing can't keep up with the need for funds. At that point who knows what would happen. Cutting spending does not seem possible for a government regardless of the administration so default seems to be in the cards.

RavingDave said...

What galls me is government taking money away from me and spending it on something stupid, or something I am very much against!

I have come to the notion that I would rather see the money burn than give it to the government. It ends up being burned either way, but at least burning it with fire doesn't empower people who's philosophy makes them my enemy.

Susan's Husband said...

I don't like defending Paterson, but he in fact objected to these taxes before they were imposed for exactly this reason. The NY legislature did it, not the Governor. It is quite the thing when a hack like Paterson is still smarter than the entire legislature.