The Fair Share Tax Reform Plan

New York faces a projected budget deficit of $15 billion in 2009-2010. Any solution will require shared sacrifice and cuts to popular programs, but working families shouldn’t bear the burden alone. Real shared sacrifice will require not just cuts, but Fair Share Tax Reform, which asks the wealthiest New Yorkers to pitch in and shoulder a reasonable share of the budget burden.

Tax Cuts for the Wealthiest New Yorkers Result in $8 billion in Lost State Revenue Each Year

Over the last 30 years, New York has reduced income tax rates on the wealthiest New Yorkers by more than 50%. Since high income tax brackets have been eliminated, working class families and the very rich now pay the same rate. These changes have resulted in a loss of $8 billion in state revenue a year.

Table: Today in New York, if your household earns $40,000, $400,000, or $4,000,000, your marginal tax rate is the same: 6.85%

While taxes for wealthy New Yorkers have gone down, their incomes have skyrocketed. The wealthiest five percent of New Yorkers have seen their share of total income explode by 24% over the last two decades, while 80% of working families have seen their share shrink.

The Fair Share Tax Reform Model

By taxing personal income over $250,000 at slightly higher rates, New York can ensure that we all contribute to solving the budget crisis. These new rates would also keep New York competitive with other states, like New Jersey (where income over $500,000 is taxed at 8.97%) and California (where income over $1 million is taxed at 10.3%.) Here is one potential model for Fair Share Tax Reform in New York:

Table: A Fair Share Tax Proposal to Raise the Personal Income Tax for Households earning more than $250,000

Source: Fiscal Policy Institute, New York State Department of Taxation and Finance. Data based on 2004 PIT returns.