New York intends to increase taxes for the state’s most affluent residents, mirroring the push at the federal level for increased taxes on the largest corporations and the wealthiest millionaires and billionaires in the United States. After reaching a $212 billion budget agreement with Governor Andrew Cuomo, legislators plan to gain $4 billion in revenue by raising taxes for wealthy New Yorkers, and an additional $99 million by allowing mobile sports betting.
The increased tax rate in the New York budget will begin with individuals making more than $1 million, and couples reporting more than $2 million in income — their rate will increase from 8.82 percent to 9.65 percent. Further, the budget will introduce two new tax brackets for the highest-earning state residents. Individuals making more than $5 million per year will pay a 10.3 percent tax rate, and those earning more than $25 million per year will pay 10.9 percent. Combined with taxes in place in New York City, millionaires will pay a tax rate between 13.5 percent and 14.8 percent, compared to the former highest rate of 13.3 percent in California. Many other states have considered or have already raised taxes on millionaires. For example, New Jersey passed a millionaire tax last year and states like California, Massachusetts, and Maryland are considering increasing their millionaire tax rates as well.
Corporations will also pay greater taxes in the new budget. Companies that make more than $5 million per year in income will now pay a 7.25 percent tax through 2023, up from a rate of 6.5 percent. The new taxes will amount to approximately $4.3 billion each year.
It is important to note that the tax increases in the new budget may not be permanent. While the effects of the budget will retroactively apply to the earlier months of 2021, the increases are set to end in 2027. Because the new tax rules will apply to all income earned in 2021, individuals in tax brackets that saw an increased rate will need to pay back their tax liability and could expect a particularly large bill — especially if they earned significant bonuses or bumps in their salary.
The increasing tax rates in the new budget come after years of attempts by legislators to convince Governor Cuomo to raise taxes on the wealthiest New Yorkers. Cuomo resisted, but the economic fallout from the Covid-19 Pandemic offered motivation to source additional revenue. Cuomo’s decision to pass increased tax rates also comes as a response to several allegations of sexual misconduct and investigations into his career that weakened his influence in budget decisions. Progressive lawmakers saw Cuomo’s weakened power as an opportunity to force progressive policies into law that he formerly refused as an economic centrist.
The additional revenue will support relief programs for those most afflicted by the Covid-19 Pandemic, including businesses and renters. Funds will also be directed to improving education standards across the state of New York.