Lawmakers, Businesses and Residents at Odds Over 'Millionaire's Tax'

Residents of the lower Hudson Valley stand to reap the biggest breaks when a tax on wealthy New Yorkers expires at the end of this year, according to an analysis by a nonprofit group.

The so-called "millionaire's tax," which took effect in 2009, imposes a surcharge on singles who make more than $200,000 and joint filers who make more than $300,000 and has resulted in a windfall of nearly $12 billion for the state. A number of Democratic lawmakers have sought to extend the tax, but Gov. Andrew Cuomo and the Senate's Republican majority staunchly oppose it.

The Center for Working Families, the nonprofit arm of the liberal Working Families Party,released a report last week that breaks down income distribution by state Senate andAssembly district. According to the analysis, which is based on 2005 income tax filings from the State Department of Taxation & Finance, the 88th and 89th Assembly districts are home to a greater percentage of top earners than any other legislative districts in New York. Those districts are represented by Assemblywoman Amy Paulin (D-Scarsdale) and Assemblyman Bob Castelli (R-Goldens Bridge), respectively.

"The $200,000 threshold is not much money to live in Westchester County," said Paulin, who voted against the surcharge in 2008. "I realize it's a lot of money to some people, but it certainly doesn't buy a millionaire's home."

In her district, which includes the wealthy enclaves of Scarsdale, Eastchester, Pelham and parts of New Rochelle, 13.9 percent of residents fall under the umbrella of the tax. Castelli's district is a close second at 13.4 percent. The assemblyman was not available for comment, but has said recently that he does not support the tax in its current form.

Bill, who lives in Paulin's district and expects to earn just under $500,000 this year as an independent lobbyist and business consultant, echoed the assemblywoman's assertion that the area's high cost of living can put a strain on a high earner's budget.

"My property tax bill was $32,000 last year, so if you want to talk about the wealthy paying for services, there you have it," said Bill, who did not want his last name published.

"I have a kid at a private college, another at a private high school, and I support my parents. That $5,000 [from the millionaire's tax] makes a difference, and I'm going to spend it and put it back into the economy, not sock it away in the bank or buy a yacht or a Pacific island."

During the state budget battle, which ended last week, Assembly Speaker Sheldon Silver floated a proposal to tax state residents who earn more than $1 million per year. According to the Assembly's budget resolution, the tax would have raised $700 million and offset deep cuts to education.

The tax became the biggest flash-point of the budget process, with hundreds of protesters occupying the Capitol on March 30, the day lawmakers passed the $132.5 billion budget, which closes a $10 billion budget gap without raising taxes or borrowing. The protesters were calling for the tax to be extended to avoid cuts to education and social services.

In the 37th Senate district, which includes Westchester's Sound Shore communities and is represented by Sen. Suzi Oppenheimer (D-Mamaroneck), 11.6 percent of residents have incomes above the current threshold. The senator said she does not support the current tax, but does support the proposal to tax those who make more than $1 million.

"Many of the wealthy people in my district that I have had a chance to speak with say that it's the right thing to do," she said.

"It's a fair tax, and it's certainly a whole lot fairer than our property tax. If we're going to pay for services one way or the other, I'd rather pay through a progressive tax."

But "fair" is subjective, and many opponents of the tax say the measure is completely unfair. Justin Higginbottom of the Tax Foundation, a conservative think-tank, called the surcharge "opportunism."

"Tuning up the tax rate to raise a billion dollars from a select minority goes beyond most concepts of fairness, even if one believes the wealthy owe a bit more to society,"  Higginbottom wrote on the group's blog.

While Westchester is home to the greatest concentration of wealthy New Yorkers, legislative districts in Rockland and Putnam tend to be wealthier than the state as a whole, where 2 percent of residents earn enough to qualify for the surcharge. 

Putnam is covered by the 40th Senate district, represented by Sen. Greg Ball (R-Patterson), where 5.3 percent of residents make enough for the additional tax. Ball opposes the surcharge, which he recently called a "job killer."

Lisa, who lives in Mahopac and retired from a lucrative marketing job five years ago to spend more time with her two young children, said that her husband could make as much as $750,000 this year. Lisa, who also declined to give her last name, said that she and her husband, who owns a stable of small businesses in Putnam and northern Westchester, both believe that the wealthy should pay higher taxes during economic downturns.

"We've been blessed. Our kids have everything they need, and when [the state is] giving less to schools and homeless shelters and seniors, I really don't see a problem with paying a bit more," she said.

"When times are good, like they were 10 years ago, then I could see them getting rid of this tax. But right now it looks like they need the money, and what I don't want to end up doing is paying for bigger problems that come later on."

In the 38th Senate district, which covers all of Rockland and parts of Orange County and is represented by freshman Sen. David Carlucci (D-Clarkstown), 3.1 percent of residents are subject to the surcharge. Carlucci last week said he was disappointed that lawmakers failed to include an extension of the tax in the budget.

"When we're talking about these cuts across the board, we want a budget that's as equitable as possible," Carlucci said.

"If we're providing cuts to some of our most vulnerable populations, especially cuts to the classroom, I think it's important that we extend the millionaire's tax and not give a tax break to the wealthiest New Yorkers."

Some of the staunchest opponents of the tax are business groups, who say that allowing it to expire sends a message to businesses that the state is serious about ending years of tax-and-spend policies and creating a friendlier climate for new and expanding businesses.

"In Westchester we have 6 million square feet of vacant class-A office building space, which is as big a threat as you're ever going to get," said Al DelBello, the chairman of the Westchester County Association and a former lieutenant governor, county executive and mayor of Yonkers.

"That has to do with the fact that companies who do business here can't afford to pay the salaries necessary to house and employ people in this region.""

"To add any tax of any sort," DelBello said, "is just going to drive more and more businesses out of the county."

Silver, the Assembly speaker, has indicated that he will push to pass the modified tax on those who earn more than $1 million, but Cuomo's staunch opposition means the measure has little chance of becoming law.