A look into the implications of tax hikes for NY’s top earners
Forbes Magazine’s list of the world’s top billionaires proved one thing: New York City is home to the most number of men who made it to the list – 10 billionaires to be exact. But last March, Gov. David Patterson agreed to pass a legislation that will bring down the budget deficit. The New York Times reports, “The plan would raise $4 billion a year by creating two new tax brackets, the highest one affecting those who earn $500,000 or more. Although the proposed tax has been called a ‘millionaires’ tax,’ it would affect those with incomes starting at $300,000, who would be taxed at a rate of 7.85 percent. The highest bracket would carry a tax rate of 8.97 percent — the same as New Jersey’s current highest rate.”
But it’s just temporary. The state’s top earners will have to wait after three years after old tax rates are imposed back. But within this taxable period, we’re expecting some drastic effects in the New York real estate market by the “Fair Share Tax Reform” program.
For millionaires, it wouldn’t really hurt their spending habits. But for those at a “slightly lower” tax bracket, this would surely affect their expenses. By studying the data from BusinessWeek in their article “How Much Can You Afford?”, they’ve put in estimates of mortgage expenses or rent in different income brackets. Those that earn a yearly income of $500,000 pay about $140,000. Meanwhile, if someone gets $1 million, the mortgage is estimated to cost $280,000. Now, you know who’s going to cut down on property expenses between the two since both will take a 7.85 percent tax.
The effect will also not be contained in New York State alone. Properties located in other cities will be at risk of putting up for sale when taxes significantly reduce their taxable income. Those who have second homes will surely be up for sale.
Finally, a higher tax would always constitute less discretionary purchases from buyers. The property bust has lowered the demand for investment properties or second homes but this tax hike is another burden.
Nevertheless, we’d be eager to look forward to the earmarked projects from the $4 billion annual revenues. If the goal of imposing heavier taxes on the rich is to redistribute wealth, the public must reap these benefits – including the top taxpayers. Do anti-socialism supporters already smell the coffee? You bet they do.