Was Dwight Eisenhower, the 34th president of the United States, a socialist?
How about Eisenhower’s predecessor, President Harry Truman, and his successor, President John F. Kennedy? Were they also socialists?
You might think so after watching television ads attacking the rise in New York taxes that was later approved by the state Legislature.
The state budget increases taxes from 8.82 percent to 9.65 percent for individuals making over $1 million, to 10.3 percent for income between $5 million and $25 million, and to 10.9 percent on income over $25 million.
Under the new rate, New York City’s top earners could pay 13.5 percent to 14.8 percent in state and city taxes, more than the top marginal income tax rate of 13.3 percent in California, which had been the highest in the nation.
The cost to Nassau’s top earners is more difficult to calculate since the county relies heavily on property taxes, based on the value of the property you own rather than how much money you make.
The commercial called the New York tax rates the work of “Democratic socialists” and called on the Legislature to instead support a state budget called for by President Biden.
Which was odd since Biden had nothing to actually do with the state budget other than to develop a $1.9 trillion national rescue plan that provided New York with $12.6 billion to fill a $15 budget hole for the next two years.
It also raised questions about the politics of our former presidents and the negative impact of higher taxes.
The top marginal rate during the Eisenhower administration began at 92 percent and reverted to 91 percent where it had been during Truman’s administration and would continue under Kennedy. The top marginal rate would then drop to 77 percent in 1964 under President Johnson and to 70 percent through 1981.
If a 10.9 percent tax rate on income over $25 million makes you a socialist, what does a top marginal rate of 92 percent make you?
In fairness to our former presidents, when they were in office the United States experienced tremendous economic growth, the middle class expanded dramatically to help build places like Long Island, and wealth and income inequality was at a historic low.
Now, we admit we have mixed state tax rates with federal tax rates.
So to be fair we should add in Biden’s plan to finance infrastructure work by raising the top tax rate on individuals to 39.6 percent from 37 percent.
But what about the impact of the $212 billion budget just approved by the state Legislature and Gov. Andrew Cuomo?
The state budget for the coming year – about 10 percent higher than last year’s – provides aid to renters, businesses, restaurants, infrastructure, undocumented immigrants and schools. All good and needed.
School districts across the state are also poised to get a major infusion of cash – some $4.2 billion – over the next three years. The money will provide extra support to districts with large numbers of high-needs students and struggling schools, something long overdue.
Supporters of the state budget say raising taxes on people making more than a million dollars a year by a couple of points is necessary to jump-start a state economy battered by the COVID pandemic.
But conservatives say that higher state taxes could lead rich New Yorkers, some of whom may already be working remotely, to move permanently to lower-tax states, such as Florida.
Opponents of tax increases on the wealthy have long argued that even the slightest incremental change will send New Yorkers fleeing to income-tax-free Florida.
As was observed in The New York Times: “Now we will have an opportunity to see how many people making more than $2 million a year will really move from the Upper East Side to South Beach – a location where climate models predict two feet or more of sea-level rise by 2060 – for a savings roughly equal to the cost of a 2005 Chevy Malibu.”
Still, this is not a concern to be taken lightly. The top 2 percent of the highest-income New Yorkers pay about half of the state’s income taxes.
Biden and Treasury Secretary Janet Yellin are seeking an international agreement to prevent corporations from shifting profits to other countries in a race to the bottom as part of the administration’s plan to raise the corporate tax rate to 28 percent from 21 percent. Biden is also seeking to crack down on companies that try to take their profits offshore.
But New York cannot do the same thing with the 49 other states seeking to lure away their residents and businesses.
A $10,000 cap on the federal deduction for state and local taxes that was included in Republicans’ 2017 tax cut legislation also falls heavily in New York.
Congressman Tom Suozzi (D-Glen Cove) has said he will not vote for any changes to the tax code unless the so-called SALT deduction is restored. We agree on SALT, but we hope Suozzi is just making a point.
We would hate for Suozzi to vote against the tax changes called for by Biden that make the tax code fairer and raise money for much-needed infrastructure projects this time around.
It is true that New York contributes well more than it receives in federal money.
But Suozzi and others should also recognize taxpayers around the country might not think it is fair to allow New Yorkers deductions for school districts that spend $35,000 per student and local government that include villages, towns, counties and special districts.
Especially when the property taxes that finance much of this government are paid at a higher rate by the less affluent than the more affluent. And Nassau County refuses to make changes to increase revenue and cut costs.
Then there is the question of whether the money spent is spent well. Infrastructure improvements spur the economy, but often in New York at too high a price.
For instance, the much-needed East Side Access project, which would bring the Long Island Rail Road to Grand Central Terminal on Manhattan’s East Side, was at last count on schedule to cost nearly $3.5 billion for each new mile of track, seven times the average cost in other cities across the world.
We don’t want to see a repeat with the money now being raised.
The state and federal governments should both make sure that whatever money is spent is spent wisely.
In doing so, they might even give those so-called socialists a good name.
