Research assistance provided by Deivid Rojas.
In 2009, when then–New York Governor David Paterson signed a temporary tax increase on the state’s wealthiest individuals—one of the so-called “millionaire’s taxes” that have passed in recent years in select states across the country—at least one multimillionaire was not happy. Talk-show host Rush Limbaugh loudly proclaimed that he was selling his New York condominium and abandoning that state as a part-time residence.
“If I knew that would be the result,” Paterson joked in response, “I would have thought about the taxes earlier.”
While Limbaugh attempted to depict himself as part of a wider trend, new studies show that surtaxes on the wealthy do not cause an exodus of well-to-do taxpayers. Moreover, surveys demonstrate that Limbaugh’s unhappiness represents a decidedly minority position. With debate in Washington focused on reducing the federal deficit and states facing yawning holes in their budgets, few ideas garner more public backing than the notion that top earners should step up to help cover the gaps.
In New York, 71 percent of residents surveyed in a recent Siena poll favored an extension of higher taxes on the state’s wealthiest. “This has broad popular support across identifications—Republicans and Democrats, conservatives and liberals, upstate and downstate,” says Sunshine Ludder of New York’s Center for Working Families. “If you ask people whether they’d rather have a millionaire’s tax or have a billion dollars cut from education and healthcare budgets, the numbers go even higher.”
Responding to similar sentiments at the national level, a group led by Illinois Democrat Jan Schakowsky introduced the Fairness in Taxation Act on March 16, which would create a federal millionaire’s tax.
Currently, the tax system makes few distinctions among those in the top 3 percent. Households making $250,000 per year are subject to income tax rates almost identical to those who bring in hundreds of millions of dollars. As The New Yorker’s James Surowiecki quipped during last year’s debates over extending Bush-era tax cuts, LeBron James and LeBron James’s dentist now pay virtually the same rate.
The Fairness in Taxation Act would change this by creating a series of new tax brackets, starting at $1 million in income and going up to $1 billion. “There’s no reason to treat the wealthiest 1 percent of the country any more specially than anyone else,” stated Arizona Democrat Raúl Grijalva, a co-sponsor of the House bill, “and right now that’s exactly what our tax system is doing.” If enacted, the measure would raise more than $74 billion this year, according to estimates by the Citizens for Tax Justice.