New York State considers ‘wealth tax’

Face with budget shortfalls and looking to fund an ambitious new program, Democratic lawmakers in New York state are gaining support for tax proposals aimed at its wealthiest residents, which include a rollback of sales tax exemptions on megayachts and private airplanes.

The proposals, which include raising income taxes on the wealthy and reassessing levies on banks, hedge funds and private equities as well as scaling back corporate incentives, is expected to generate some US$30bn annually.

“Why on Earth should a billionaire get a tax break on the purchase (of) a yacht or a private plane?” Senator Brad Hoylman asked the Daily News. “That is not the 21st century approach to making certain we have the revenue for schools and affordable housing and mass transit.”

The state sales tax exemption was put into place in 2015 with the support of Assembly Speaker Carl Heastie, arguing at the time the wealthy were still buying boats, just going out of state to do it.

That sentiment is echoed today by David Friefel, of the watchdog group Citizens Budget Commission.

“High income taxpayer mobility is a real thing and it’s something to be concerned about. So to further increase taxes you have the possibility of encouraging those people to leave and take their tax dollars with them.”

Democratic Senate Majority leader Andrea Stewart-Cousins has also expressed skepticism when it comes to raising revenue through new taxes.

Heastie said last month he would rather raise revenue than allowing spending cuts to programs like Medicaid, which provides health care for the state’s poor.

“These kinds of wealth taxes protect the people we should be looking out for: hard-working New Yorkers who are living paycheck to paycheck,” Hoylman said.

The state of Texas enacted a similar sales tax measure in 2019, citing Texans leaving the state to by big boats and planes, and touting the measure as an economic development and jobs measure.

The recreational marine industry in the US collectively cringes at so-called luxury taxes, after the Federal government placed a 10% levy on boats over US$100,000 and private planes valued above US$250,000.

In 1991, US sales of luxury boats dropped 70% from the previous year.

In the two years the tax was in place, around 100 boatbuilders cut operations and laid off thousands of workers. Many filed for Chapter 11 bankruptcy protection.