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Fair Share Tax Reform

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                        1
To address the worst economic crisis
in 70 years, we need real shared
sacrifice.

   nPrudent Spending Cuts

   nFederal Aid

   nA Fairer Taxation System

                                       2
 New York’s Deficit

nThe worst fiscal crisis in almost 70 years

nThe State cannot simply cut its way out

nNew York needs to implement a plan of 
 real shared sacrifice


                                              3
Just cutting spending will devastate
the poor and middle class and
exacerbate the economic crisis
n Massive cuts will gut critical public services
n Cuts are the worst possible response to the 
  current economic crisis

           faced with such an unpleasant choice,
       "When
    economic theory and evidence gives a clear
    and unambiguous answer: it is economically
    preferable to raise taxes on those with high
    incomes than to cut state expenditures."

               - Joseph Stiglitz, 2001 recipient, Nobel
                   Prize in Economics
                                                          4
The present shortfall is compounded by
years of high-end PIT cuts




  Source: Fiscal Policy Institute



   NY has cut its top PIT rate by more than 50% over
   the last 30 years - from 15.375% to 6.85%           5
        Two decades of tax cuts have
        resulted in $20 Billion of Lost
        Revenue in 2008-2009




Source: Fiscal Policy Institute           6
    Totally unfair: wildly different
    incomes, same flat tax rate

n The average New York teacher 
  earns $62,332…

 Her marginal tax rate =
 6.85%

n Jamie Dimon, Chairman and CEO 
  of JP Morgan & Chase, made
  $44 million last year…

 His marginal tax rate =
 6.85%
                                       7
The Result – A Massive Tax Shift
n New York has made up for lost income tax revenue 
  by raising local taxes—property, sales and excise—
  that hit working and middle-class families the hardest

n New York is now second in the nation, behind only 
  Texas, in local tax burden

n If New York had indexed its tax brackets and 
  personal exemption to inflation rather than cut from 
  the top, 95% of New Yorkers would be paying lower 
  income taxes and the State would have $8 billion of 
  more revenue a year.                                     8
The result – a Regressive Tax System




       Source: Institute on Taxation and Economic Policy

       Those with the least income
      carry the highest tax burdens                        9
How do we solve the current
crisis?
    The Governor has proposed massive 
    program cuts and 137 new or increased 
    taxes and fees, almost all regressive

    or…



                                             10
 A fairer and more economically
 sound alternative: Fair Share Tax
 Reform (FSTR)
n Fair share tax reform would

   n Mitigate human impact of devastating cuts

   n Mitigate negative economic effect of state spending 
     cuts

   n Raise approximately $6.0 billion

   n Begin restoring fairness to the tax structure


                                                            11
Gov. Paterson’s budget proposal would
increase the state’s reliance on regressive
taxes, even as it guts services
The budget proposes increases in the sales tax
on several products and services, which already
hit working families the hardest….




Source: Institute on Taxation and Economic Policy   12
 FSTR treats the disease, not the
 symptom
n Yes, this year’s budget crisis is extraordinary.  But chronic budget 
  deficits require a permanent solution

n Permanent PIT reform will help eliminate the deficit now and in the 
  long run provide revenue to cut property and sales taxes that hit 
  working and middle class families the hardest

    n In New York, local revenues (mainly property and sales taxes) 
      produce 54% of all revenues (compared to the 40% national avg.)

    n For 95% of New Yorkers, property and sales taxes make up the 
      majority of their total tax burden

    n Middle and working class New Yorkers need property and sales tax 
      relief – not income tax relief
                                                                          13
The Fair Share Tax Reform Plan
                           Fair Share Tax Reform Model

                                                    New           New
 Income       # of NYS % of NYS     Rate             Tax        Revenue   % of New
Brackets      Taxfilers Taxfilers Increase          Rates     (thousands) Revenue

 Above
$250,000      189,256       2.0%        1.40%       8.25%        567,954    9.50%

 Above
$500,000       73,649       0.8%        2.12%       8.97%        823,425    13.80%

  Above
$1,000,000     57,162       0.6%        3.45%      10.30%       4,590,431   76.70%
 TOTAL        320,067       3.5%                                 $6.0bn     100.00%

Source: Fiscal Policy Institute, Department of Taxation and Finance                   14
   How Fair Share Tax Reform Would Work
A New Yorker making 1% of Jamie                        Don’t forget that state income
Dimon’s salary, or $440,000 a year would               taxes are deductible against
be paying an additional $126 per week.                 federal income tax…

                                                          Annual Cost
                         Additional                       After Average     Weekly Cost
   Taxable    Weekly    Taxes Under   Weekly Cost of         Federal        After Federal
   Income     Income     New Plan       Increase          Deductions*       Deductions
  $300,000    $5,769      $4,597           $88               $3,678             $71
  $440,000    $8,462      $6,557          $126               $5,246             $101
  $550,000    $10,577    $12,057          $232               $9,646            $186
 $2,000,000   $38,462    $69,397         $1,335              $55,518          $1,068

The new rates intend to keep New          State        Top Rate
York competitive with states in           New Jersey   8.97% > $500,000
the region and those with
comparable economies                      California   10.3% > $1,000,000
                                                                                            15
 And – new tax rates don’t fully start
 at $250,000!
n New rates apply to “taxable income” AFTER Federal and 
  State adjustments from gross income

n Adjustments include: NYS/NYC income tax offset, 
  mortgage, charitable and standard deductions, student 
  loans etc

n This means New York taxpayers must be making 
  significantly more than $250,000 per year to face fully 
  paying the first new tax rate



                                                             16
 On average, a tax filer may need to 
 make over $315,000 of gross income 
 before fully paying the new tax rate…

                Federal
               Adjusted           NYS Adjusted          NYS Taxable         Annual Increase
Gross Income Gross Income         Gross Income            Income             Under FSTR
  $261,860        $255,225          $249,000             $230,125                  $0
  $263,707        $257,526          $251,000             $232,250                 $65*
  $314,605        $307,923          $301,000             $282,250                $3,952
This slight increase is due to the "tax table recapture", which applies new rates gradually on
AGI between $250k-$300k
    Source: Fiscal Policy Institute
                                                                                                 17
Why start @ $250,000?
          …Fairness & Fiscal Sense
n Raises adequate revenue ($6.0bn) to minimize cuts

n Targets tax increases only at those able to afford them (top 3.5%) 

n Brings tax system up to date with today’s skewed income 
  distribution (in 2007, the top 5% of New Yorkers captured 47% of 
  all income)

n Is least harmful option to economic recovery (by taxing income 
  most likely to remain in savings)

n Enjoys overwhelming public support (which drops almost 30% at  
  $150,000 start, Kiley Poll, 11/08)

                                                                    18
        Higher Rates in Other States
State              Top Rate on Single   State         Top Rate on Single
                   Filers                             Filers
California         10.3% > $1,000,000   Hawaii        8.25%    >   $48,000
Rhode Island       9.9%    > $357,700   North Carolina 7.75%   >   $60,000
Vermont            9.5%    > $357,700   Minnesota     7.85%    >   $74,650
Oregon             9%      > $7,600     Idaho         7.8%     >   $24,763
Iowa               8.98% > $63,315      South Carolina 7%      >   $13,150
New Jersey         8.97% > $500,000     Arkansas      7%       >   $30,100
Washington DC      8.7%    > $40,000    Montana       6.9%     >   $15,600
Maine              8.5%    > $18,950    New York      6.85%    >   $20,000

  Source: Tax Foundation
                                                                        19
 Fair Share Tax Reform would 
 benefit Upstate
n Permanent PIT reform 
  will provide more funds 
  for local services, 
  lowering the undue 
  property tax burden of 
  Upstate New Yorkers

n This would help the 
  Upstate economy

n Only 1% of Upstate tax 
  filers would be affected
                                20
  How will it affect small business?
n While small businesses are essential to the state’s economic vitality, 
  most have median annual incomes far below $250,000
 
n Most small business owners will benefit from reduced pressure to 
  raise local property and sales taxes

n Cuts to public spending would be harmful to economic growth
 
   n The Center for Economic Policy and Research estimates that if 
     cuts comprise 40% of NY’s deficit plan, the State could lose over 
     8,000 jobs in FY 2009 and 68,400 jobs in FY 2010

n PIT increases in other states have not led to job losses

    n In 2003-2005, NY created 127,000 jobs
    n From 2000-2008, CA experienced a 3.16% increase in private 
      sector employment
                                                                            21
   Will the Rich Leave?
nCommon statement: PIT increases 
 will cause wealthy residents to 
 move away resulting in job loss, 
 reduced tax base, and overall 
 economic harm

nMigration patterns are influenced 
 by a variety of factors, including 
 availability of vital public services 
 such as education, public safety, 
 and access to healthcare

nWhile the political rhetoric is 
 catchy, it is  not supported by the
 evidence
                                          22
Will the Rich Leave: Evidence
New Jersey 
nIn 2004, Passed a new top rate of 
 8.97% over $500K
  n A Princeton University report found the increase 
    had ““little effect on migration patterns among half 
    millionaire households.”

  n The number of half-millionaires has grown by 70% 
    following the increase


                                                            23
 Will the Rich Leave: Evidence
California
n In 2004, passed a new rate of 10.3% over $1,000,000

   n The California Tax Reform Association concluded, “[t]here is no
     credible…data which demonstrates…any loss to the General
     Fund resulting from changes in behavior…among high-income
     taxpayers with regard to location…(due to) increases in
     marginal tax rates at the upper end.”

   n The California Budget Project found that since the increase the number 
     of millionaires increased 37.8%

New York
n From 2003-2005, NYS employed two new rates of 7.25% over $100K 
  and 7.7% over $500K

   n The Fiscal Policy Institute found the number of millionaires grew by 
     30%

                                                                           24
   Polls consistently show support
   for a high-end PIT increase…

n Siena Poll, 3/08: 72% of respondents supported a 
  tax surcharge on those making over a million dollars 
  annually
n Siena Poll, 10/08: 69% of likely voters preferred 
  increasing the income tax on millionaires
n Kiley & Company, 11/08: 75% of voters prefer 
  increasing taxes on income earners over $200,000
n Quinnipiac University, 1/09: 80% support for a 
  millionaire tax

                                                     25
Especially when it helps avoid
cuts to public services
n When voters are offered a choice between making major budget 
  cuts or increasing taxes on households making over $200,000:
   n 78% favor high-end income tax increases over cuts in state aid 
      to public schools
   n 78% favor high-end income tax increases over cuts in state 
      funding for hospitals, nursing homes, and home healthcare 
      services

n Proposed high-end tax increases enjoy widespread support 
  throughout  every region of the State
   n 78% of New York City voters
   n 67% of Suburban voters
   n 87% of Upstate East voters
   n 70% of Upstate West voters

n Source: Kiley & Company, 11/08
                                                                       26
Let’s not “waste this crisis…”

 n FSTR is the best short-term solution to an 
   economic crisis of historic dimensions

 n FSTR is the best long-term approach to 
   remedying the state’s chronic fiscal shortfalls, 
   restoring fairness to the state’s tax system, 
   and supporting services critical to the needs 
   of New York’s poor and working people



                                                       27
                            One New York: 
                     Fighting for Fairness Coalition
1199SEIU Child Care Corporation ● ACORN ●Advocates for Children ● AIDS Community Services of Western New York ● AIDS-Related Community Services, 
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Center of New York ● Association to Benefit Children ● Barrier Free Living ● Black Equity Alliance ● Brooklyn Center for Independence of the Disabled ● CAMBA 
● Campaign for Fiscal Equity ● Canaan Senior Service Center ● Cathedral Community Cares ● Center of AIDS Outreach and Prevention ● Center for 
Independence of the Disabled, NY ● Chhaya Community Development Corporation ● Child Care Council - CUNY ● Child Care Inc. ● Children's Aid Society ● 
Chinatown Manpower Project ● Citizen Action of NY ● Citizens Advice Bureau ● Citizens Committee for Children of New York ● Citywide Council on High Schools 
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Educational Excellence for English Language Learners ● Coalition for the Homeless ● Coalition of Behavioral Health Agencies ● College of Mount Saint Vincent - 
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HIV Law Project, Inc. ● Homeless Services United ● Housing Works ● Hudson Guild ● Human Services Council ● Hunger Action Network of New York State ● 
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Participation Project/ 32BJ ● New York Coalition for Adult Literacy ● New York Committee for Occupational Safety and Health ● New York Counties Registered 
Nurses Association ● New York Immigrant Coalition ● New York State Coalition for School Based Health Center ● New York State NAACP ● New York State 
Nurses Association ● New Yorkers for Fiscal Fairness ● NY Jobs with Justice ● New York City AIDS Housing Network ● NYC Coalition for Educational Justice ● 
New York State Child Care Coordinating Council ● New York State Public Employees Federation, Region 10 ● New Yorkers for Fiscal Fairness ● Nonprofit 
Coordinating Committee of New York ● One Stop Senior Services ● Palladia, Inc. ● Partnership For The Homeless ● Phipps Community Development Corporation 
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Center for Analysis and Advocacy ● SEIU Local 32BJ ● Service Program for Older People, Inc. ● Sky Light Center, Inc. ● South Asian Council For Social Services ● 
South Asian Youth Action ● Stanley M. Isaacs Neighborhood Center, Inc. ● Staten Island Inter-Agency Council for the Aging ● Staten Island Legal Services ● 
Strycker's Bay Neighborhood Council, Inc. ● Supportive Housing Network of New York ● Tenants Political Action Committee ● The After-School Corporation ● 
The AIDS Council of Northeastern New York ● The Arab-American Family Support Center ● The Bridge Inc. ● The Bronx Health Link ● The Center for Arts 
Education ● The Center for Law and Social Justice, Medgar Evers College- CUNY ● The Children's Village ● The Committee for Hispanic Children and Families, 
Inc. ● The  Bridge Inc. ● The Fortune Society ● The Geriatric Mental Health Alliance of New York ● The International Center in New York ● The Muslim Women's 
Institute for Research and Development ● The Retirees Association of District Council 37 ● The School for International Studies ● Thorpe Family Residence, Inc. 
● Time Out from Testing ● UAW LOCAL 2325 Association of Legal Aid Attorneys (AFL-CIO) ● UAW Region 9A ● UFT Queens High School for the Sciences 
Chapter ● United Chinese Association of Brooklyn ● United Community Centers, Inc. ● United Federation of Teachers ● United Neighborhood Houses ● University 
Settlement Society ● Urban Justice Center ● Urban Pathways, Inc. ● Village Care of New York ● Violence Intervention Program, Inc. ● VIP Community Services ● 
Welfare Reform Network ● Welfare Rights Initiative ● West Side Campaign Against Hunger ● Westchester Disabled On the Move Inc. ● Women's Housing and 
Economic Development Corporation ● Working Families Party ● YKASEC-Empowering the Korean American Community ● YWCA of Queens                                        28

				
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