New York millionaires will soon be able to pay the highest tax rates

New York City millionaires are about to fall at the highest tax rate in the country.

Governor Andrew Cuomo and state legislative leaders are almost reaching agreement on a 2022 budget proposal that would create an extra $ 4.3 billion a year by increasing corporate income and taxes, reported Luis Ferré-Sadurní and Jesse McKinley from The New York Times. The proposal foresees two new income tax ranges for individuals with maturity up to the end of 2027, according to exclusive details of the Times.

Those earning between $ 5 million and $ 25 million would be taxed on 10.3% of their income. This increases to 10.9% for those who earn more than $ 25 million. And individuals who earn more than $ 1 million and couples who earn more than $ 2 million will see tax rates rise from 8.82% to 9.65%.

These tax rates have particularly affected people with higher income in New York City. The city already has a maximum income tax rate of 3.88%. If the budget proposal is approved, they would be spending between 13.5% and 14.8% in state and municipal taxes, according to the Times. This exceeds the country’s high marginal income tax rate: 13.3% for California’s biggest earners.

New York is dealing with economic problems

Cuomo said in January that he planned to raise taxes if the White House did not help the state recover from its $ 15 billion deficit, Grace Insider said. It is the biggest deficit in New York history, she wrote. The state’s biggest deficit before that was $ 10 billion, which Cuomo said was “very, very difficult” to manage.

In a speech, Cuomo attributed the New York deficit to the state “attacked by the federal government” in recent years, as well as to the cost of COVID-19, which caused the state’s revenues to fall by $ 5.1 billion.

As the epicenter of the United States ‘first wave of COVID-19, New York City was hit by the closure of small businesses and saw many of its highest-paid residents move to take advantage of other states’ taxes. Urban expert Richard Florida told Insider that the flight of the wealthy caused many financial problems for superstar cities like New York.

Cuomo asked the federal government to provide emergency relief to the New York pandemic. He said that if Washington gave the state only $ 6 billion in the “worst case scenario”, it would raise taxes to cover the difference.

“We have a plan in place, a strength we didn’t have before and I believe our future is bright, but Washington must act justly if we are to emerge on the other side of this crisis,” he said.

While Democrats considered raising more than $ 7 billion in new revenue for the state, the Times reported, those discussions fell apart when President Joe Biden’s $ 1.9 trillion stimulus package was approved, which included $ 12.9 billion in direct aid to the state of New York. It also included $ 5.6 billion for New York City, which Juliana Kaplan, of Insider, reported that may have saved catastrophic cuts in the city budget.

Cuomo resisted the tax hike for years, fearing it would take businesses and the wealthy to other states. If all the wealthiest New Yorkers fled the city, they could take more than $ 133 billion with them. It was how much 1% of New Yorkers earned in income in 2018, a Bloomberg report revealed.

The Times attributed Cuomo’s change of opinion to the economic consequences of the pandemic, to a growing progressive influence in the legislature and to the governor’s own “diminishing influence”.

The budget proposal is about to be finalized, as Biden is said to take the taxation of the wealthy even more seriously. He said that Americans who earn more than $ 400,000 will see a tax increase from “small to significant” and that those who earn more may see their highest income tax rate rise to 39%.

If Biden and Cuomo’s tax proposals pass, it means that wealthier New York City residents may be paying more than half of their tax earnings.