Why these New York millionaires want to raise their own taxes
A group of millionaires in New York state are calling for higher taxes on the wealthy. Their message adds to the debate over whether tax breaks for the rich could help fight inequality.
Could raising taxes on the rich help fight poverty?
A group of more than 40 millionaires in New York state say so, and they have written to Gov. Andrew Cuomo (D) and other lawmakers proposing higher taxes for the top 1 percent of earners. The letter – obtained by the Associated Press and signed by Abigail Disney, Steven C. Rockefeller, and Leo Hindery, Jr., among others – says the effort would be crucial to addressing child poverty and homelessness, and rebuilding the nation’s aging infrastructure.
The letter comes from a subset of the “Patriotic Millionaires,” a group of more than 200 US millionaires and billionaires calling for policies that benefit wage-earners and the majority of Americans over the wealthy elite. Their message adds to the longstanding debate over tax breaks for the wealthy – and whether or not such policies could help combat growing inequality in the United States today.
“[T]he current level of economic disparity is largely the result of a multi-decade effort by wealthy elites to enact legislation designed to enhance their personal wealth and their political power,” the group’s website reads. “This is done with little or no regard for the negative consequences such policies have on the vast majority of Americans.”
The Republican-led US Senate, with the support of trade associations and other groups, opposes the idea of higher taxes for the rich, and efforts to reform tax treatment at the national level have stalled in Congress for years.
In New York, the Democratic majority in the Assembly, along with groups such as the Patriotic Millionaires and the Hedge Clippers – a liberal organization that seeks to curb what it sees as hedge fund excesses – continue to pursue legislation toward what they consider more equitable taxation.
Among the policies at issue in New York, for instance, is so-called carried interest – the share of the profits of an investment that is paid to the investment manager – and how those funds are taxed. Under current law, that money is considered a capital gain and is taxed at a rate much lower than that of wages.
In early March, New York State Assembly members proposed legislation that would charge the managers of private equity, venture capital, and hedge funds for what they would have paid if carried interest was taxed nationally as ordinary income. Such a change would generate about $3.7 billion in revenue for the state, according to a report by the Hedge Clippers. The money would go to housing, infrastructure, and public schools.
California, Connecticut, Illinois, Massachusetts, New Jersey, and Pennsylvania also have similar legislative efforts planned.
Supporters of carried interest say reforming the tax policy would be a needless risk.
“This tax policy encourages the risk taking that is required to start and grow companies," according to Private Equity Growth Capital Council, a trade association that defends carried interest. "Changing the taxation of carried interest would upend a long-standing, successful policy that has helped America prosper for more than 100 years."
Still, some wealthy Americans insist that changing such policies is critical to addressing income inequality, and continue to call on fellow millionaires to join the fight.
“The popular anger and frustration being channeled in the 2016 Presidential campaigns, the young people worrying about their economic futures (and the sustainability of the planet), the parents fretting about their children’s futures now and their own retirement security later. This is the trashing – and the muting – of the American Dream,” writes Mr. Hindery, managing partner of New-York based InterMedia Partners, a private equity fund, in a blog post titled, “Why I Am a Patriotic Millionaire.”
“You either believe that America and Americans can survive and prosper with these acute, egregious imbalances, or you don't,” he continues. “And if you do, it’s probably because you are personally benefitting from them, which in my opinion is selfishness in the extreme.”
This report contains material from The Associated Press and Reuters.