New York City Mayor Bill de Blasio proposed raising taxes on the city’s highest earners. Specifically, de Blasio has proposed raising the city tax from 3.88% to 4.11% on individuals who earn more than $500,000 annually, or couples who earn more than $1 million annually. New York City is one of the few cities in the United States with a municipal tax, and its 3.88% rate on its highest earners is already one of the highest city tax rates in the country. Per the mayor, roughly 32,000 people would face this tax hike, which is expected to raise $800 million a year.
Will the proposal become law?
One should never say never, but this plan does face substantial opposition from important players across party lines in state and local government. New York Governor Andrew Cuomo, a Democrat, as well as New York Senate Majority Leader John Flanagan and Metropolitan Transit Authority chairman Joseph Lhota, who are Republicans, have stated that they do not support the proposal. Furthermore, previous proposals by de Blasio to raise taxes on high earners have failed previously. One such attempt involved raising taxes to finance pre-kindergarten, and another to create affordable housing for senior citizens. Both of these attempts met with failure.
What are alternative proposals to raise money to fix the subway?
Governor Andrew Cuomo is looking into “congestion pricing” as a way to pay for subway repairs. With congestion pricing, commuters who drive into Manhattan during its busiest hours would pay for the privilege of doing so. More than 10 years ago, then-Mayor Michael Bloomberg proposed that drivers should pay $8 to enter the city during its busiest times. Cuomo has not yet made a concrete proposal as to how much it would cost to enter Manhattan during its busiest times.
Congestion pricing would, at least in theory, raise revenues to pay for subway repairs while reducing motor vehicle traffic on Manhattan. While congestion pricing has not yet caught on in American cities, London and Stockholm, among other cities across the world, have relied on congestion pricing. While congestion pricing has its advocates, it remains to be seen whether this proposal has any traction with legislators.
Taxpayers across New York City and beyond may not be happy to hear about more taxes. With that said, a tax lawyer can be instrumental in creating effective strategies to minimize one’s tax burden while complying with state, local and federal tax authorities.