Tax Hikes Needed on Wall Street?

A writer from London unhelpfully weighs in on the massive budget deficit that New York state is mired in. Her solution, not surprisingly, is to increases taxes.

"Life in New York is about to get very interesting. Like so many other states, New York is in the red, facing a budget deficit of $9bn dollars in the coming fiscal year. In response to that deficit our political leaders have thrown out the scalpel and are wildly swinging the axe on just about every public service you can imagine, from prenatal care to senior centres.

The accepted wisdom is that there is just no money to be had so these cuts have to be. But the truth is that there are billions of dollars out there for the taking, if Governor Paterson or Mayor Bloomberg were willing to raise income tax on the richest of New Yorkers even by a tiny amount."

Actually, the truth is that the jobs on Wall Street are increasingly mobile and can be performed pretty much from anywhere, and there's no reason to think that any money-grab by Albany wouldn't be followed by a net a migration by Wall Streeters out of New York City to more tax-friendly environments.

Another point the writer makes is that in New York state, "a person earning $20,000 a year is paying just 2% less in income taxes than a billionaire".

Yes, in absolute percentage terms the tax rate is "only" 2% higher. But one could also think of it in terms of the highest rate of 8.97% being 31% higher than the lowest rate of 6.85%. But putting all this number-crunching aside, it's apparent that in real dollar terms, higher-income folks already pay a lot more in taxes than lower-income folks.

In order to overcome the budget deficit, a better and more-sustainable plan is for politicians to reduce spending, rather than seeking to take even more money out of taxpayer's pockets.