Billionaire Mark-to-Market Tax Can Raise Over $5.5 Billion To Help Keep New York State Running
New York can and must do more to address its budget crisis than wait for federal relief. While the economy has taken a hit, the state can raise enough tax revenue to avoid catastrophic budget cuts—to education, health care, and other crucial services—and add new programs to combat the coronavirus recession by helping those most in need. The Fiscal Policy Institute’s latest report explains how a new type of tax on those who can afford it most can help. The new tax would apply to the economic income from wealth and would apply only to those taxpayers with over $1 billion.
“New York had the greatest income divide before COVID-19, and that trajectory has not stopped. Implementing tax initiatives like the Billionaire Mark-to-Market tax can provide the revenue necessary to support essential programs and services. Cutting services at this point will slow down everyday New Yorker’s ability to regain their fiscal footing and security. In its first year, the mark-to-market tax is projected to generate substantial new revenue well above the funding required for the excluded workers relief fund. This will make additional funds available for programs, on which many New Yorkers rely.”Jonas Shaende, Chief Economist, Fiscal Policy Institute.
The Billionaire Mark-to-Market Tax Act (MtM) (S8277/A10414) sponsored by Senator Jessica Ramos and Assemblymember Carmen De La Rosa, could raise $5.5 billion or more in the first year. Coupled with other tax reforms, this tax could generate the revenue necessary to meet the state’s needs.
The Billionaire Mark-to-Market Tax would be levied on the increase in market value of stocks, bonds, and other assets. Currently, there are no annual taxes on the increased value of these assets, even as they may double or triple over time, and even if they borrow against those assets and buy yachts and houses – a tax-free method which helps build even greater wealth. The MtM Act would tax the annual gains at the same rate as other income, which for billionaires currently would be 8.82 percent.
The Ramos/De La Rosa bill proposes to use some of the money generated in the first year to create an unemployment compensation fund for the people who are excluded from the current state unemployment insurance benefits—such as people who are undocumented, who have been recently released from incarceration, or some people working in the cash economy. An excluded workers fund would cost $3.1 billion, assuming an average of 15 percent of undocumented workers and an even higher share of people who are leaving incarceration are unemployed and receive the funds over nine months. Assuming this $3.1 billion cost, the MtM revenues would still leave over $2 billion to pay for education, health care, and other state priorities. FPI’s report on excluded workers offers more detail.
“In the midst of a pandemic, it would be a disaster to cut education and programs that keep New Yorkers healthy, housed, and fed. And, the state has to step up where the federal government has failed and help people excluded from our unemployment system—which in turn also helps local economies. Adjusting our state’s tax policy to cover the economic income of ultra-wealthy New Yorkers is a sensible approach,” said David Dyssegaard Kallick, Deputy Director of the Fiscal Policy Institute and Director of FPI’s Immigration Research Initiative
Further reforming our state’s tax policies by updating the top tax rates through Ultra-Millionaire Tax bills (UMT) would add even more state revenue. Such proposals include (A10364/S8164) Simotas/May, (A10450/S8329) Glick/Mayer, and (A10363/S7378) Rosenthal/Jackson.
The Fiscal Policy Institute believes that equitable tax system reform benefits not only struggling workers but our entire state.
The Fiscal Policy Institute is a nonpartisan, nonprofit research and education organization committed to improving public policies and private practices to better the economic and social conditions of all.