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Fair Share Tax Reform

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To address the worst economic To address the worst economic crisis in 70 years, we need real crisis in 70 years, we need real shared sacrifice.shared sacrifice.

Prudent Spending CutsPrudent Spending Cuts

Federal AidFederal Aid

A Fairer Taxation SystemA Fairer Taxation System

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Just cutting spending will Just cutting spending will devastate the poor and middle devastate the poor and middle class and exacerbate the class and exacerbate the economic crisiseconomic crisis

Massive cuts will gut critical public services Cuts are the worst possible response to the

current economic crisis

"When faced with such an unpleasant choice, economic theory and evidence gives a clear and unambiguous answer: it is economically preferable to raise taxes on those with high incomes than to cut state expenditures."

- Joseph Stiglitz, 2001 recipient,

Nobel Prize in Economics

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The present shortfall is compounded The present shortfall is compounded by years of high-end PIT cutsby years of high-end PIT cuts

NY has cut its top PIT rate by more than 50% over the last 30 years - from 15.375% to 6.85%

Source: Fiscal Policy Institute

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Two decades of tax cuts have Two decades of tax cuts have resulted in $20 Billion of Lost resulted in $20 Billion of Lost Revenue in 2008-2009Revenue in 2008-2009

Source: Fiscal Policy Institute

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Totally unfair: wildly Totally unfair: wildly different incomes, same flat different incomes, same flat tax ratetax rate

The average New York teacher earns $62,332…

Her marginal tax rate = 6.85%

Jamie Dimon, Chairman and CEO of JP Morgan & Chase, made $44 million last year…

His marginal tax rate = 6.85%

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The Result – A Massive Tax The Result – A Massive Tax ShiftShift

New York has made up for lost income tax revenue by raising local taxes—property, sales and excise—that hit working and middle-class families the hardest

New York is now second in the nation, behind only Texas, in local tax burden

If New York had indexed its tax brackets and personal exemption to inflation rather than cut from the top, 95% of New Yorkers would be paying lower income taxes and the State would have $8 billion of more revenue a year.

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The result – a The result – a RegressiveRegressive Tax Tax SystemSystem

Those with the least income carry the highest tax burdens

Source: Institute on Taxation and Economic Policy

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How do we solve the How do we solve the current crisis?current crisis?

The Governor has proposed massive program cuts and 137 new or increased taxes and fees, almost all regressive

or…

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A fairer and more economically A fairer and more economically sound alternative: Fair Share sound alternative: Fair Share Tax Reform (FSTR)Tax Reform (FSTR)

Fair share tax reform would

Mitigate human impact of devastating cuts

Mitigate negative economic effect of state spending cuts

Raise approximately $6.0 billion

Begin restoring fairness to the tax structure

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Gov. Paterson’s budget proposal would Gov. Paterson’s budget proposal would increase the state’s reliance on increase the state’s reliance on regressive taxes, even as it guts regressive taxes, even as it guts servicesservices

Source: Institute on Taxation and Economic Policy

The budget proposes increases in the sales tax on several products and services, which already hit working families the hardest….

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FSTR treats the disease, not the symptom

Yes, this year’s budget crisis is extraordinary. But chronic budget deficits require a permanent solution

Permanent PIT reform will help eliminate the deficit now and in the long run provide revenue to cut property and sales taxes that hit working and middle class families the hardest

In New York, local revenues (mainly property and sales taxes) produce 54% of all revenues (compared to the 40% national avg.)

For 95% of New Yorkers, property and sales taxes make up the majority of their total tax burden

Middle and working class New Yorkers need property and sales tax relief – not income tax relief

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The Fair Share Tax Reform The Fair Share Tax Reform PlanPlan

Source: Fiscal Policy Institute, Department of Taxation and Finance

Fair Share Tax Reform Model

Income Brackets

# of NYS Taxfilers

% of NYS Taxfilers

Rate Increase

New Tax

Rates

New Revenue

(thousands)% of New Revenue

Above $250,000 189,256 2.0% 1.40% 8.25% 567,954 9.50%

Above $500,000 73,649 0.8% 2.12% 8.97% 823,425 13.80%

Above $1,000,000 57,162 0.6% 3.45% 10.30% 4,590,431 76.70%

TOTAL 320,067 3.5% $6.0bn 100.00%

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How Fair Share Tax Reform Would Work

Taxable Income

Weekly

Income

Additional Taxes Under

New Plan

Weekly Cost of

Increase

$300,000

$5,769 $4,597 $88

$440,000

$8,462 $6,557 $126

$550,000

$10,577 $12,057 $232

$2,000,000

$38,462 $69,397 $1,335

State Top Rate

New Jersey

8.97% > $500,000

California

10.3% > $1,000,000

The new rates intend to keep New York competitive with states in the region and those with comparable economies

Don’t forget that state income taxes are deductible against federal income tax…

Annual Cost After Average Federal

Deductions*

Weekly Cost After

Federal Deduction

s

$3,678 $71

$5,246 $101

$9,646 $186

$55,518 $1,068

A New Yorker making 1% of Jamie Dimon’s salary, or $440,000 a year would be paying an additional $126 per week.

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And – new tax rates don’t fully And – new tax rates don’t fully start at $250,000!start at $250,000!

New rates apply to “taxable income” AFTER Federal and State adjustments from gross income

Adjustments include: NYS/NYC income tax offset, mortgage, charitable and standard deductions, student loans etc

This means New York taxpayers must be making significantly more than $250,000 per year to face fully paying the first new tax rate

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On average, a tax filer may need to make over $315,000 of gross income before fully paying the new tax rate…

Source: Fiscal Policy Institute

Gross Income

Federal Adjusted

Gross IncomeNYS Adjusted Gross Income

NYS Taxable Income

Annual Increase Under FSTR

$261,860 $255,225 $249,000 $230,125 $0

$263,707 $257,526 $251,000 $232,250 $65*

$314,605 $307,923 $301,000 $282,250 $3,952

This slight increase is due to the "tax table recapture", which applies new rates gradually on AGI between $250k-$300k

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Why start @ $250,000? Why start @ $250,000? …Fairness & Fiscal …Fairness & Fiscal SenseSense

Raises adequate revenue ($6.0bn) to minimize cuts

Targets tax increases only at those able to afford them (top 3.5%)

Brings tax system up to date with today’s skewed income distribution (in 2007, the top 5% of New Yorkers captured 47% of all income)

Is least harmful option to economic recovery (by taxing income most likely to remain in savings)

Enjoys overwhelming public support (which drops almost 30% at $150,000 start, Kiley Poll, 11/08)

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Higher Rates in Other States

State Top Rate on Single

Filers

California 10.3% > $1,000,000

Rhode Island

9.9% > $357,700

Vermont 9.5% > $357,700

Oregon 9% > $7,600

Iowa 8.98% > $63,315

New Jersey 8.97% > $500,000

Washington DC

8.7% > $40,000

Maine 8.5% > $18,950

State Top Rate on Single

Filers

Hawaii 8.25% > $48,000

North Carolina

7.75% > $60,000

Minnesota 7.85% > $74,650

Idaho 7.8% > $24,763

South Carolina

7% > $13,150

Arkansas 7% > $30,100

Montana 6.9% > $15,600

New York 6.85% > $20,000

Source: Tax Foundation

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Fair Share Tax Reform would benefit Upstate

Permanent PIT reform will provide more funds for local services, lowering the undue property tax burden of Upstate New Yorkers

This would help the Upstate economy

Only 1% of Upstate tax filers would be affected

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How will it affect small business?

While small businesses are essential to the state’s economic vitality, most have median annual incomes far below $250,000

Most small business owners will benefit from reduced pressure

to raise local property and sales taxes

Cuts to public spending would be harmful to economic growth

The Center for Economic Policy and Research estimates that if cuts comprise 40% of NY’s deficit plan, the State could lose over 8,000 jobs in FY 2009 and 68,400 jobs in FY 2010

PIT increases in other states have not led to job losses

In 2003-2005, NY created 127,000 jobs From 2000-2008, CA experienced a 3.16% increase in

private sector employment

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Will the Rich Leave?Common statement: PIT

increases will cause wealthy residents to move away resulting in job loss, reduced tax base, and overall economic harm

Migration patterns are influenced by a variety of factors, including availability of vital public services such as education, public safety, and access to healthcare

While the political rhetoric is catchy, it is not supported by the evidence

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Will the Rich Leave: Evidence

New Jersey In 2004, Passed a new top rate of

8.97% over $500K

A Princeton University report found the increase had ““little effect on migration patterns among half millionaire households.”

The number of half-millionaires has grown by 70% following the increase

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Will the Rich Leave: Evidence

California In 2004, passed a new rate of 10.3% over $1,000,000

The California Tax Reform Association concluded, “[t]here is no credible…data which demonstrates…any loss to the General Fund resulting from changes in behavior…among high-income taxpayers with regard to location…(due to) increases in marginal tax rates at the upper end.”

The California Budget Project found that since the increase the number of millionaires increased 37.8%

New York From 2003-2005, NYS employed two new rates of 7.25% over

$100K and 7.7% over $500K

The Fiscal Policy Institute found the number of millionaires grew by 30%

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Polls consistently show Polls consistently show support for a high-end PIT support for a high-end PIT

increaseincrease…

Siena Poll, 3/08: 72% of respondents supported a tax surcharge on those making over a million dollars annually

Siena Poll, 10/08: 69% of likely voters preferred increasing the income tax on millionaires

Kiley & Company, 11/08: 75% of voters prefer increasing taxes on income earners over $200,000

Quinnipiac University, 1/09: 80% support for a millionaire tax

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Especially when it helps avoid Especially when it helps avoid cuts to public servicescuts to public services When voters are offered a choice between making major

budget cuts or increasing taxes on households making over $200,000: 78% favor high-end income tax increases over cuts in

state aid to public schools 78% favor high-end income tax increases over cuts in

state funding for hospitals, nursing homes, and home healthcare services

Proposed high-end tax increases enjoy widespread support throughout every region of the State 78% of New York City voters 67% of Suburban voters 87% of Upstate East voters 70% of Upstate West voters

Source: Kiley & Company, 11/08

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Let’s not “waste this Let’s not “waste this crisis…”crisis…”

FSTR is the best short-term solution to an economic crisis of historic dimensions

FSTR is the best long-term approach to remedying the state’s chronic fiscal shortfalls, restoring fairness to the state’s tax system, and supporting services critical to the needs of New York’s poor and working people

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One New York: Fighting for Fairness Coalition

1199SEIU Child Care Corporation ● ACORN ●Advocates for Children ● AIDS Community Services of Western New York ● AIDS-Related Community Services, (ARCS) ● AIM Independent Living Center ● Alliance for Quality Education ● APEX ●  APICHA ● ARISE Coalition ● Asian American Federation ● Asian Youth Center of New York ● Association to Benefit Children ● Barrier Free Living ● Black Equity Alliance ● Brooklyn Center for Independence of the Disabled ● CAMBA ● Campaign for Fiscal Equity ● Canaan Senior Service Center ● Cathedral Community Cares ● Center of AIDS Outreach and Prevention ● Center for Independence of the Disabled, NY ● Chhaya Community Development Corporation ● Child Care Council - CUNY ● Child Care Inc. ● Children's Aid Society ● Chinatown Manpower Project ● Citizen Action of NY ● Citizens Advice Bureau ● Citizens Committee for Children of New York ● Citywide Council on High Schools ● Class Size Matters ● Coalition for a District Alternative ● Coalition for After School Funding ● Coalition for Asian American Children and Families ● Coalition for Educational Excellence for English Language Learners ● Coalition for the Homeless ● Coalition of Behavioral Health Agencies ● College of Mount Saint Vincent - Institute for Immigrant Concerns ● Commission on the Public's Health System ● Community Access ● Community Board 7, Manhattan ● Community Board 11, Manhattan ● Community Health Care Association of New York State ● Community Voices Heard ● Comunilife, Inc. ● Connect, Inc. ● Connecting to Advantages ● Council of Family and Child Caring Agencies ● Council of Senior Centers and Services of New York City, Inc. ● Cypress Hills Child Care Corporation ● Cypress Hills Local Development Corporation ● Damayan Migrant Workers Association ● Day Care Council of New York, Inc. ● District Council 37, AFSCME, AFL-CIO ● District Council  37, Local 1549, AFSCME ● East Side House Settlement ● Economic Justice and Social Welfare Network ● Education Voters of New York ● Educational Alliance ● Empire Justice Center ● Empire State Economic Security Campaign ● Episcopal Social Services ● Erasmus Neighborhood Federation ● Family Justice ● Federation of Protestant Welfare Agencies ● FEGS ● Fiscal Policy Institute ● Fifth Avenue Committee ● Flanbwayan Haitian Literacy Project/Haitian Women for Haitian Refugees ● Freedom Community Center ● Friends and Relatives of Institutionalized Aged, Inc. ● Gay Men's Health Crisis ● Goddard Riverside Community Center ● Good Jobs New York ● Grand Street Settlement House ● Gray Panthers, NYC Network Greater ● Chinatown Community Association ● Haitian Americans United for Progress ● Hamilton-Madison House ● HANAC, Inc. ● Harlem Independent Living Center ● Harlem United Community AIDS Center, Inc. ● Henry Street Settlement ● Highbridge Community Life Center ● Hispanic AIDS Forum, Inc. ● Hispanic Federation of New York State ● Hispanic Senior Action Counsel ● HIV Law Project, Inc. ● Homeless Services United ● Housing Works ● Hudson Guild ● Human Services Council ● Hunger Action Network of New York State ● Immigrant Social Services, Inc. ● Indonesia Sino-American Community Center ● Institute for Community Living ● Institute for the Puerto Rican/Hispanic Elderly, Inc. ● Internationals Network for Public Schools ● Isabella Geriatric Center ● Jamaica Service Program for Older Adults ● Jewish Child Care Association ● Joint Public Affairs Committee for Older Adults (JPAC) ● Korean American Family Service Center ● Korean Community Services of Metropolitan New York, Inc. ● Korean Family Counseling and Research Center ● Legal Action Center ● Legal Aid Society ● Legal Information for Families Today ● Legal Services NYC ● Lenox Hill Neighborhood House ● Lincoln Square Neighborhood Center, Inc. ● Local 372 New York City Board of Education Employees ● Long Island Progressive Coalition ● Lower East Side Family Union ● Make the Road New York ● Medicaid Matters ● Medicare Rights Center ● Melrose Senior Center ● Metro Justice ● Metro New York Health Care for All Campaign ● MFY Legal Services ● Midwood Development Corp. ● Mosholu Montefiore Community Center ● NAACP Metropolitan Council  ● National Association of Social Workers, NYC Chapter ● National Black Leadership Commission on AIDS ● National Center for Schools and Communities at Fordham ● Neighborhood Family Services Coalition ● New Settlement Apartments ● New York AIDS Coalition ● New York Citizens' Committee on Aging, Inc. ● New York City Central Labor Council ● New York Childrens Action Network ● New York City Employment and Training Coalition ● New York Civic Participation Project/ 32BJ ● New York Coalition for Adult Literacy ● New York Committee for Occupational Safety and Health ● New York Counties Registered Nurses Association ● New York Immigrant Coalition ● New York State Coalition for School Based Health Center ● New York State NAACP ● New York State Nurses Association ● New Yorkers for Fiscal Fairness ● NY Jobs with Justice ● New York City AIDS Housing Network ● NYC Coalition for Educational Justice ● New York State Child Care Coordinating Council ● New York State Public Employees Federation, Region 10 ● New Yorkers for Fiscal Fairness ● Nonprofit Coordinating Committee of New York ● One Stop Senior Services ● Palladia, Inc. ● Partnership For The Homeless ● Phipps Community Development Corporation ● Pratt Center for Community Development ● Professional Staff Congress - CUNY ● Project FIND ● Project Renewal ● Safe Horizon ● SCAN-New York ● Schuyler Center for Analysis and Advocacy ● SEIU Local 32BJ ● Service Program for Older People, Inc. ● Sky Light Center, Inc. ● South Asian Council For Social Services ● South Asian Youth Action ● Stanley M. Isaacs Neighborhood Center, Inc. ● Staten Island Inter-Agency Council for the Aging ● Staten Island Legal Services ● Strycker's Bay Neighborhood Council, Inc. ● Supportive Housing Network of New York ● Tenants Political Action Committee ● The After-School Corporation ● The AIDS Council of Northeastern New York ● The Arab-American Family Support Center ● The Bridge Inc. ● The Bronx Health Link ● The Center for Arts Education ● The Center for Law and Social Justice, Medgar Evers College- CUNY ● The Children's Village ● The Committee for Hispanic Children and Families, Inc. ● The  Bridge Inc. ● The Fortune Society ● The Geriatric Mental Health Alliance of New York ● The International Center in New York ● The Muslim Women's Institute for Research and Development ● The Retirees Association of District Council 37 ● The School for International Studies ● Thorpe Family Residence, Inc. ● Time Out from Testing ● UAW LOCAL 2325 Association of Legal Aid Attorneys (AFL-CIO) ● UAW Region 9A ● UFT Queens High School for the Sciences Chapter ● United Chinese Association of Brooklyn ● United Community Centers, Inc. ● United Federation of Teachers ● United Neighborhood Houses ● University Settlement Society ● Urban Justice Center ● Urban Pathways, Inc. ● Village Care of New York ● Violence Intervention Program, Inc. ● VIP Community Services ● Welfare Reform Network ● Welfare Rights Initiative ● West Side Campaign Against Hunger ● Westchester Disabled On the Move Inc. ● Women's Housing and Economic Development Corporation ● Working Families Party ● YKASEC-Empowering the Korean American Community ● YWCA of Queens