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Editorial: Knee-jerk taxation

What in the world is Carl Heastie thinking? The Democratic Speaker of the New York State Assembly, facing the prospect of a $6.1 billion deficit in the current state budget, didn’t even want to talk about efficiencies or duplication or special interests or budget cuts. He just wants to raise taxes.

“For us in the Assembly, we would always rather raise revenues than cut,” he said. Truer words were never spoken.

Heastie, it is fair to say, is worried about those who might be harmed by budget cuts, including the poor who rely on the state’s costly Medicaid program, the program driving most of the deficit. It’s also fair to add Assembly Democrats to the list of those who could be hurt if any cuts were to displease any of their powerful constituencies, including unions covering health care workers.

Medicaid is, of course, a critical lifeline for New Yorkers who are poor or lack any other health insurance. But, as this page recently noted, New York runs one of the country’s most expensive Medicaid programs, which are jointly run by Washington and state governments.

Health care for the poor is a primary responsibility of government, but Heastie’s priorities are out of order when his first inclination is to ask New Yorkers, who already shell out big bucks in one of the nation’s highest-taxes states, to pay even more to support a program whose costs are out of line and far above the national average.

Heastie’s plan echoes the move Albany made in 2009 when it imposed higher income tax rates on the state’s wealthiest residents. It was a key part of the government’s response to the financial crisis of the Great Recession. It was called a “millionaire’s tax” and it was supposed to be temporary. In fact, it has been renewed through 2024. It’s worth about $4.5 billion a year to state budgeters.

It’s easy, and not unfair, to ask the wealthy to pay a higher tax rate than those with less; it’s the concept at the heart of a graduated, or progressive tax system. But there’s a big risk, as well, that demanding ever more will push wealthy people out of New York. That is especially true in the New York City area, a high-cost region that is home to the state’s greatest concentration of wealthy residents.

This isn’t the first time the Assembly has sought to make the millionaire’s tax even more profitable. Last year, the chamber’s Democrats tried to create a new, three-bracket tax scheme. The top bracket, at 10.32%, would have kicked in on people making over $100 million annually. It failed, though few would be surprised to see it resurrected for the new budget season, which begins in January.

Also resurfacing is a proposed pied-a-terre tax, which would impose a property tax surcharge on homes valued at more than $5 million. The plan raised constitutional concerns this year; a new proposal addresses them and is gaining support from some legislators.

These idea will appeal to many New Yorkers. But “too much of a good thing” is a real concept, and the truth is that any tax increase drifts into that territory if it is imposed with no effort whatsoever to find areas to cut the budget or to streamline Medicaid.

There is an additional risk to New York, stemming from the 2017 tax reform in which Washington limited federal deductions for state and local taxes to $10,000. With that, high income taxpayers area already being hit with a larger federal tax bill. At some point, the desire to remain in New York will be swamped by the rising costs.

Fortunately, the Democrats who won control of the State Senate last year are more cautious about raising taxes. They fear the Assembly’s approach could endanger their new majority status. And, frankly, it should threaten it if the automatic, first answer to a budget deficit is new taxes.

Democrats will only feed their reputation as spendthrifts if they imposes higher taxes on anyone – rich, middle class or poor – without first scouring the budget for areas to save money. That’s irresponsible governing.

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