No Guillotine Talk Just Yet: CA, NY Propose Tax Hikes for Millionaires

No Guillotine Talk Just Yet: CA, NY Propose Tax Hikes for Millionaires

I was watching a video last weekend, which followed the band PJ Harvey on tour in England.

Once a hot meteor flying through space, the group now rates with young people a step or two above Bing Crosby, I suspect. I don’t care, I like both acts, and anyway, it got me to thinking about millionaires.

In my youth, rock-n-roll stardom seemed the foxiest get-rich-quick scheme going. I like programs about bands and singers, because you see people living the dream. Sadly, the PJ vid presented a drab reality, a day comprising two hours of onstage ecstasy and 22 hours in vans and motels. “As a musician,” lamented the guitarist, “this is all you wanna do… but you’d never wanna.” Darn you, cold reality.

I wonder if the rich ever reflect that way, if only for a moment after tennis. Is it really worth the bother, the envious attention, the threats of mega-taxes and shortening bodies by a head – one never knows, it could come to that again.

What have they done wrong? My rich friends, who are very kind despite my penny-pinching ways and disdain for polo, seem to feel it, too – like they’ve pulled a fast one and rate punishment. They still seek tax shelters with gusto and ask me if life insurance covers skiing mishaps (yes). Those darn millionaires: they’re ever to blame, wracked by sad guilt, but always, some fear, ready to hop on the G550 and rocket to safety in Guernsey.

We concede the difficulties of the day. The pandemic has cost the US around $8 trillion and counting and the bill must be paid. A roaring economy is the favored way to pound down debt, but in tough cases, a tax hike may be needed – or at least, a reasoned debate of proposals should be engaged. That latter point, in our contentious and suspicious political milieu, is often the sticky bit.

Legislation to raise taxes on the ultra-rich has recently appeared from both the east and west coasts, in New York and California. High-tax states in the best of times, we might characterize them as the usual suspects.

In New York, a tax bill sponsored by what one news report dreadfully described as “progressive lawmakers and activists” aims to wring $5.5 billion a year from the state’s billionaires. The extra revenue, generated by a new capital gains levy, would fund unemployment insurance to state citizens who have lost jobs due to the coronavirus. The latest information suggests that New York is home to around 120 billionaires.

Democratic Party statements, in tune with the times, seem aimed at pitting average folk against the superrich. New York’s governor, Andrew Cuomo, warns that billionaires can easily move elsewhere if threatened by a prohibitive tax rise. After all, Connecticut and New Jersey are conveniently located an easy commute away, while newly learned telecommuting skills suggest HNW residence is possible nearly anywhere.

Mr. Cuomo is not averse to a new tax on the wealthy per se, but favors an increase at the federal level, which would make it nearly inescapable. This is the eternal problem of state-level taxation policies, particularly those threatening the ultra-wealthy: with all those resources, upping sticks and moving away is an easy proposition.

If one doubts the chances, consider the ongoing exodus of ordinary citizens from California to low-rent, high-growth states like Texas, Arizona, Nevada and Oregon. Moving is brutal – more stressful than divorce, we’re told – yet for the last five years, California has seen an annual net population loss of more than 100,000 people. It’s a beautiful state, still full of opportunity, but for many, it’s simply too expensive.

Democrats in California seem inclined to risk it. Despite the cost, some wealthy citizens might need to stand pat in the state – Hollywood moguls, for example. In the last week of July, Democratic state legislators said that a tax hike on millionaires is needed to fund education and social services, two areas strongly disrupted by the coronavirus.

If the party’s proposals are enacted, Cali millionaires – to say nothing of the state’s 160 billionaires – could find themselves bracketed at 54%, if federal and state taxes are combined. Democrats hope their proposal will bring the state around $6 billion per year.

Supporters see social equity at the heart of the issue: working people have suffered disproportionately during the pandemic, so the ultra-rich shouldn’t balk at paying a bigger share of the bill. We won’t deny the argument’s sense, and judging from talks with our wealthiest clients, they don’t object to paying up in a crisis. They are worried, though: they hear politicians and protesters alike vituperating against the affluent and wonder where even reasonable proposals might eventually take them.

The tax-the-rich issue is ancient and variously perceived. Ronald Reagan famously cut taxes in the 1980s, but the paltry boost to middle-class earners led my father, living on the outskirts of dirty old Boston, to opine that the feds might as well have kept it – all that money, taken together, might do struggling people some good. His younger brother, who’d taken the brave step of migrating to California in the ‘50s, thought he was nuts, missing the big picture, trusting the overlords a bit too much. They fought the same way over the New Deal, I hear.

Mostly, pops and Uncle Lefty argued about which state had the sweetest strawberries and the slickest NBA stars. Big-ticket issues. This is how brothers and Americans in general tend to relate. The debate on taxing the rich as a solution to problems near term and long, flows on like an endless stream – more is to follow. As a vital aside, let it be known that Massachusetts has the best peaches, in case you were wondering.

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