Obama and Cuomo part ways on taxing the rich

In his state of the union address last night, President Barack Obama repeated his call for higher taxes on the wealthiest Americans.

Over the next couple of days, I’ll be blogging about this debate over higher taxes for our richest citizens.

A good place to start is by contrasting the approaches of two of the country’s most powerful and influential Democrats, Mr. Obama and New York Gov. Andrew Cuomo.

Here’s what the President had to say last night:

And if we truly care about our deficit, we simply can’t afford a permanent extension of the tax cuts for the wealthiest 2 percent of Americans.

Before we take money away from our schools or scholarships away from our students, we should ask millionaires to give up their tax break. It’s not a matter of punishing their success. It’s about promoting America’s success.

But on January 5th, during his own State of the State address in Poughkeepsie, Gov. Cuomo took a very different tack, arguing that taxes would actually have to be cut to restore prosperity.

“A key element of this program,” he announced, “will be holding the line on taxes now while working to lower taxes in the future.”

Gov. Cuomo made it clear that balancing the budget won’t be done with the help of additional taxes on the wealthy:  “[We will] close the more than $10 billion deficit in the 2011-2012 budget without new taxes or borrowing,” he insisted.

These are radically different approaches to the painful decisions, sacrifices and cuts that lie ahead.  So what do you think?  Is Cuomo right that wealthy people already pay enough in New York state?

Or is Obama right that in a time of fiscal crisis, when deep cuts in things like healthcare and education are looming, the wealthiest citizens should do more?

As always, your comments welcome.

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33 Responses to “Obama and Cuomo part ways on taxing the rich”

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  1. Bret4207 says:

    You need more information than is provided. My question would be how many “rich” people are there that either the Federal or State Gov’ts would tax, how much are they currently paying, how much do they contribute overall, what would the effect on JOBS be if the tax rate (it’s not a tax break) were raised, at what point would they be declared “rich enough to tax more” in the first place, what mechanisms are in place for them to hide most of their wealth as the truly wealthy do and what can be done about that? I’d love to see the entire Kennedy clan brought down along with most of Hollywood, people like Soros and Bloomberg, and all the other “do as I say not as I do” liberal crowd, the ones that shout about lack of conservative compassion and caring while doing nothing compassionate or caring themselves. But using taxation as a tool for “social justice” is no more right coming from me than it is from Obama, Kerry or anyone else.

    It’s easy to say “Tax the rich more!” but defining “rich” changes over time. When I was growing up there was scandal in town when it was discovered a husband/wife that taught at a local school was making nearly $20K a year!!! It wasn’t long ago that someone making $100K was “wealthy”, yet I know people “making” 5 and 6 times that much that are less well off than I am.

    Easy sound bite definitions and slogans like “Tax the rich” need a lot more information to be processed before acting on them.

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  2. Brian Mann says:

    Actually, President Obama defined his terms pretty clearly. He described the rich as the top 2% of American families.

    Those Americans earn between $200,000 and $250,000 per year. In all the debates over eliminating the Bush-era tax cuts, this has been clear.

    This amount is clearly not typical for Americans — 97% of families don’t have incomes that high.

    So despite conservative claims to the contrary, it’s hard to see a real risk of “average” wage-earners being somehow muddled up into this debate.

    -Brian, NCPR

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  3. newt says:

    Obama is correct in that the top 2% should pay more. Forget fairness, all kinds of nonpartisan economic studies, which I can dig up if necessary, demonstrate that this is simply a better way of paying for increased stimulus (which is a good thing, when in a recession), or deficit reduction, if you insist.

    But that’s not the point. If NYS tried to increase taxes on the wealthy, they could move to New Jersey, or Utah, or nearly any other low tax state (which is all 49, or so I am led to believe). Better to let the NY billionaires and millionaires slide, and keep them paying whatever they can’t get out of now in NYS.

    On the other hand, if Obama could somehow get taxes increased on all U.S. wealthy, many would move to what low-tax paradise? Mexico? Ivory Coast? China? Don’t think so.

    But raising Federal taxes on the wealthy is about as likely as going back to the Moon in this particular “Sputnik Moment.”

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  4. verplanck says:

    Contrary to that liberal strawman that Bret has erected, I think most liberals aren’t interested in “taking down” the wealthy. My point of view is that they’ve benefited from the fruits of labor that the government has provided them (infrastructure, student loans/public eduction, public services/utilities), and therefore can afford to pay more than an average person.

    It’s been proven many times locally and nationally that people do not want a reduction in government services. Port Henry voted to keep its village government. Majorities of Americans don’t want any changes made to social security. Seniors will never agree to reductions in their medicare benefits. Liberals are trying to find solutions that will satisfy these people.

    Conservatives have never put together a serious proposal that reduces the size of government. From what I’ve seen so far, it looks like they’re more interested in ending “liberal” programs like the NEA than actually cutting the deficit. Their impact on the budget is minuscule. Paul Ryan comes the closest, but the GOP leadership has run away from his bold proposal.

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  5. Pete Klein says:

    It’s all about Cuomo. He just doesn’t want to pay higher taxes.

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  6. phahn50 says:

    I agree with verplanck 100%

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  7. oa says:

    “From what I’ve seen so far, it looks like they’re more interested in ending “liberal” programs like the NEA than actually cutting the deficit.”

    The conservative agenda is simple and consistent: Wholeheartedly support anything that drives liberals crazy. Wholeheartedly oppose anything liberals might agree with.

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  8. Bret4207 says:

    What strawman Verplank? John Kerry docks his new yacht in another state to avoid taxes in his home state, the one he represents. That’s no strawman. What are the limousine liberals actually doing to make things better? Coming up with new taxes! You think Kerry or the Kennedys used publicly funded student loans to attend school? Talk about a strawman!

    I agree that the liberals don’t want to take down the wealthy, many of our wealthy citizens ARE liberals. What they want is a continued class war between “rich” (Bush/Cheney/Gingerich) and “poor” ( union voters, minorities, felons…you know, good Democrats) to ensure they stay in power as much as possible so that they remain wealthy.

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  9. Paul says:

    Brian,

    Is this a trick question?

    “Is Cuomo right that wealthy people already pay enough in New York state?

    Or is Obama right that in a time of fiscal crisis, when deep cuts in things like healthcare and education are looming, the wealthiest citizens should do more?”

    The answer is simple. They are both right. Wealthy people already do pay enough in NYS, and they need to do more. The best thing to do is to find ways to get these wealthy people to invest the money in ways that will create jobs and more prosperity for others, and for themselves. Is the presidents approach to collect this money as income tax and then let the government decide how to invest the money the best way to do that? Maybe?

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  10. Dan3583 says:

    I’m not a legal scholar; i don’t even play one on TV. I do think that most laws are written and passed with the best of intentions, and most are expected to bendfit the greatest number of people. There are glaring exceptions, of course.

    Unfortunately, there is a huge industry dedicated to finding loopholes to benefit wealthy patrons. Let’s face it; most of us don’t have lawyers and others trying to fingd every (barely) legal means to keep us from paying fair taxes or getting subsidies we don’t need. For the most part, we who don’t have them pay the tax bill for those who do, and underwrite these subsidies for those who shouldn’t get them.

    If our laws were implemented the way they were intended, in most cases they would have a more positive effect than they do. I agree with Brett (whom I assume is correct) that Kerry should not be able to dock his yacht in another state to avoid taxes.

    Like the saying goes, “99.9% of lawyers give the rest of them a bad name”.

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  11. JDM says:

    It’s disingenuous of Obama to mention the “wealthiest 2%” in his State of the Union speech, when he clearly was wanting to tax everyone who made more than $250,000 in reality.

    He’s the “bait and switch” president of the century.

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  12. verplanck says:

    Bret,

    The strawman I was referring to was your backhanded assertion that liberals want to tax simply to “take down” the wealthy. What rich liberals to to evade taxes didn’t support your assertion.

    What the liberals will point to that made things better in the US? Social Security, Medicare, and the recent health care bill. All of which (despite their faults) provide real services/rights to those in need. I don’t see how you can argue with that. That these services aren’t necessary? Sure, but that’s a different debate.

    As for class war, I don’t buy it. Sure, the Dems put up those campaign ads attacking “Big Bizness”, but the GOP does the same thing with illegal immigrants and “welfare queens”. Let’s look at how the Dems have governed since 2008. Corporate taxes have dropped (lame duck session tax agreement). The CEO of GE is now the head of Obama’s council of economic advisors. The revised health care bill pretty much keeps the existing delivery system (employer-based coverage with massive tax breaks) intact. How is this anything close to a war on the rich?

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  13. phahn50 says:

    Contrast our situation (for the very rich) with other countries with pure free-market economies and no taxes (most third world countries). In those countries the very rich dont pay taxes, but they do pay for huge private security services or even whole armies. They are subject to kidnap/ransom schemes at any time. Worst, a revolution/civil war/change in government can result in their being killed and/or losing everything. They have to bribe every government official if they want anything done.

    Not here, and for that privilege they should be grateful, and happily pay more taxes (in part to keep it that way).

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  14. scratchy says:

    I don’t think you can accurately compare the two proposals. NY has the highest tax burden in the country, and has a deficit that can be bridged by controlling spending, while the US has a lower tax burden than many other countries and has a very large structural deficit that will either require huge cuts to entitlements or some tax increase.

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  15. Bret4207 says:

    Verplank, you provide some very good examples of liberal hypocrisy, thank you. But I don’t see where I made any assertion, backhanded or otherwise, that liberals want to “take down” the wealthy. As I clearly stated, they want and benefit from the rich/poor class warfare. That doesn’t involve taking down the wealthy, it involves using political power to use taxpayer funds to purchase the votes of those they count on for support. That way the rich liberals stay rich and in power. Classic example- SEIU, some teachers unions and Obama care. Did you know some SEIU groups and some teachers unions are exempted from the regulations? Stay in power by paying off those who provide the means for you to stay in power. Republicans do the same thing with other groups. Cripes, that’s half of what the Tea Party was formed over, special interest groups getting special treatment at taxpayer expense.

    Call it what you will but strawman is entirely inaccurate.

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  16. phahn50 says:

    Bret – it is the (you) conservatives who are doing the most “class warfare”. You guys are constantly bringing it up any time a progressive tax rate is discussed. It is really more of a moral argument than a wealth/power preservation one (your claim). The tax burden should fall more heavily on those who can most afford to pay. In essence, the tax burden should be equal pain, not equal percentage of income (flat rate). In part it is also practical. If you want to have a government that does stuff – military, education, social security, medicare and other social safety net stuff, you cant get it from poor people.

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  17. Mervel says:

    I think they are in different institutional situations and are actually both correct.

    Wealthy people in the US should and could pay more federal income tax and more inheritence tax. We have done this before; all we are talking about is a tax structure that we had in the 1990′s and it did not destroy the economy then and it won’t now and is still far lower than historical averages for federal income tax rates in the US. So I think in this case President Obama makes a good case.

    On the other side however Gov Cuomo is dealing with a state that has the highest total state and local taxes in the nation. How much higher can he realistically go? Unlike the situation at the federal level, rich people are much more fluid in where they decide to live and earn at the state level then they are between countries. We are already paying for f this decline as wealthy people and people who want to start businesses leave the state. At some point if we push this too far they will kill the golden goose of Wall Street.

    I think they both make sense given their situations and are not necessarily opposed to each other.

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  18. Paul says:

    phahn50, wealthy individuals like (Steve Forbes) have been arguing for your flat tax for years. You will never get any democratic support for such a good idea.

    Something like 50% of the population pays no income tax. A straight out flat tax would (what someone above called) “punish” the poor. Most folks opposed to a flat tax don’t like it because it is fair and can’t be manipulated by politicians like described above, who do you think passed the laws that created the loopholes?

    A flat tax with a income cut off of say 25,000 dollars might work. You also need a much simpler tax code, that will save the government a bundle.

    The right-left argument always gets in the way of reality. The capital needs to flow into the market to improve the economy and the debt and deficit issues. Both democrats and republicans want the same exact thing. Like I said above is having it flow thorough the federal bureaucracy via things like “stimulus” etc the best way ti get the results we are looking for?

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  19. phahn50 says:

    Paul – a flat tax shifts the tax burden to the poor – its not a “good idea” for lots of reasons. Its not “fair”, and importantly you cant get much money from poor people, and if you tax people to the limit of what the poor can afford, ….

    The only reason to like it (flat tax) is if either you are rich and dont want to pay much tax, or if you generally think that the government shouldnt have any money to do stuff with like have a social safety net. The rich can self-insure, so they dont get anything personally from the safety net other than a country that is relatively safe for their money. Many rich people think that there should be good social safety net because that is the way things should be. They are willing to pay a higher tax rate because it is the right thing to do.

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  20. Mervel says:

    Most people feel that even though we have a progressive income tax system in the US, the wealthy somehow weasel out of paying taxes through a variety of shelters, deductions and general shenanigans. Is this true? I don’t really think it is but a flat tax is appealing to many people for this reason.

    I do think there are philosophical reasons to have every single person in the US pay some income tax, even if it is $10 per year. Fiscally it would make very little difference but it would give all Americans ownership in what is going on in this country and their government.

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  21. Myown says:

    I am not sure I see a difference between Obama and Cuomo. Sure Obama said, “And if we truly care about our deficit, we simply can’t afford a permanent extension of the tax cuts for the wealthiest 2 percent of Americans.” That is absolutely true. But why didn’t Obama press that last month when he caved in to the Republican demand to extend the Bush tax cuts for the wealthy? These are the same tax cuts that were supposed to stimulate the economy ten years ago. And while the tax cut extension was approved the legislation also severely reduced the tax credit available for home energy conservation updates. It also eliminated the tax credit for property taxes for those that don’t itemize (ie, low income households). A friend of mine is retired and living on a modest pension. She will no longer get that tax credit which was worth $125 to her. But the richest 0.1 percent will get a tax break of $370,000.

    The budget deficits at both the State and Federal level are too large to close just by cutting spending. There will have to be increases in taxes. Overall, our taxes are low compared to other developed countries. And for the past 30 years we have been on an irresponsible tax cutting binge. In 1980 the top federal tax rate was 70%, now it is about half that. NY’s top rate used to be 15%, now it is 6.85%. And what has it produced, a massive redistribution of wealth to the rich, poorer poor, a shrinking middle class and huge deficits.

    In 1976 the richest 1% of Americans took home less than 9% of total US income. Today it is almost 24%. The last time it was that high was 1928. We are all going to have to accept some adjustments. Our roads might not get plowed as often, potholes left unfilled, it might take longer for fire or police to respond, school class size may increase, etc. Like it or not, taxes will have to rise for everyone and especially so for the wealthy. It is time for those who have gained the most from the benefits of society to “man-up” and shoulder more of its costs.

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  22. Pete Klein says:

    The Class War is over and the rich have won.

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  23. verplanck says:

    Mervel,

    the “flat tax is better ’cause it’s simpler” argument is a red herring. It’s deductions that make the tax code so unwieldly. Income taxes with different rates for different income levels can be done simply, and our annual tax prep burden replaced with a single sheet of paper.

    It’s only when people realize that their pet deductions (i.e. tax free health care benefits, mortgage deduction) actually affect them that we run into reality, and realize how much of a problem it will be to revamp our tax code.

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  24. scratchy says:

    Myown says:
    “The budget deficits at both the State and Federal level are too large to close just by cutting spending. There will have to be increases in taxes.”

    I agree with you on the federal deficit, but the facts do not support your assertion with regard to the state deficit.

    http://www.bloomberg.com/news/2011-01-26/cuomo-tells-new-york-lawmakers-to-prepare-for-first-budget-cut-since-1995.html

    “New York Governor Andrew Cuomo, facing a budget deficit of $10 billion or more, may cut spending for the first time in at least 17 years, lawmakers say.”

    “To cut spending in New York, Cuomo and the Legislature must agree on changes to state laws that call for outlays for operations to accelerate next year by $13.1 billion, or 17 percent, to $92.3 billion, according to budget documents.”

    State spending is expected to rise by a staggering 13.1 billion, but the deficit is only 10 billion. So the state can increase spending by 3.1 billion and not have to raise taxes. Federal funds are expected to decline by 5.4 billion. NY does not- despite the propaganda from many union- have a revenue problem. It has a spending problem, and a very serious one.

    It would be nice if the media pointed out that much of the deficit is due to increased spending and that “cuts” usually refer to reductions in the growth rate of spending and not spending less this year than last.

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  25. Mervel says:

    That is correct. We are not talking about cutting state spending, we are talking about slowing the rate of increases down.

    In states like New York or New Jersey you reach a tipping point where the massive size of government no longer produces good public services but in fact becomes corrupt and becomes a burden to the public rather than an asset. Why don’t we have the best schools in the country? Why don’t we have lower poverty rates than places like Nebraska or other lower tax midwestern states, our infrastructure should be great compared to other states, yet we don’t see government spending going to do any of those things. if we had great public services I think people would say yeah I think this is worth it.

    There is a very good reason that FDR adamantly opposed public unions there are no checks and balances.

    We will see it is doubtful that the gov will be able to succeed against these very powerful interests I notice that the machine is already gearing up to oppose any cuts. President Obama in the same way will likely fail in making in real cuts, he may be able to raise taxes a little.

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  26. Paul says:

    phahn50, sorry I misunderstood your comment. So how do you define “equal pain”? If it is not done as a percentage what would be more fair?

    As I said there should be a cut off where below this there are no income taxes, or everyone at a lower income level needs to pay the ten bucks someone described. What is a fair number?

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  27. Myown says:

    Mervel,
    I’m not sure it is fair to blame unions for all of NY State’s fiscal woes. There are large areas of the state budget other than state employees. Besides there are 11,500 fewer NY state employees today than there were in 2008. And last year the unions agreed to a new Tier 5 plan that requires employees to contribute 3% of their salary to the pension fund their entire career. Plus the retirement age was raised to 62. Tier 5 will save the state 35 billion. Seems like the unions are cooperating.

    And consider this. 75% of public sector workers in NY are in unions but only 20% of public sector employees in Texas are represented by unions. Guess without a strong presence of those pesky unions in Texas things ought to be economic nirvana there. Well Texas now has a budget gap bigger than New York’s. But I doubt it was caused by the unions.

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  28. scratchy says:

    But Texas has much lower taxes than NY, meaning they can raise taxes without having to worry about driving people out. NY, by contrast, is driving people out of its state based on the existing tax structure. Just look at the recent Census figures.

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  29. Myown says:

    According the 2010 Census NY State’s overall population actually increased by 2.1% from 2000. It is the upstate areas that have lost population. Is there data that shows most people leaving NY leave because of taxes? Demographics would suggest that some are expiring and others are retired and moving to someplace with a warmer climate. The actual difference between the taxes in NY and Texas is about 3%. Hard to believe someone would pull up roots, sell a house, quit a job, etc. and move all the way to Texas just to save 3% in state taxes. And ironically, the place in NYS with the largest population growth is the New York City area – which has the highest taxes in the state.

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  30. oa says:

    Stop confusing us with facts, Myown.

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  31. scratchy says:

    NYC is the world’s financial center; a world class city. Bloomberg calls the city a luxury product where people will pay a little more for the privilege to live and do business there. 2.1% is about a fifth of the national growth rate, meaning people are moving to other states including neighboring cold climate states.
    http://www.nytimes.com/interactive/2010/12/21/us/census-districts.html

    And keep in my mind, taxes aren’t the only way NY is expensive: insurance, regulatory, electricity, etc. costs are also high. Look at all the private employers who have closed or downsized their North Country presence in recent years. A lot of companies have moved their corporate headquarters from NY to Texas for tax reasons.

    That being said, NY did the unthinkable actually eliminated a program last year- Kosher inspectors- so maybe there’s hope. But lawmakers are clamoring against the cuts, so maybe not. http://online.wsj.com/article/SB10001424052748704735304576058100916662270.html

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  32. Mervel says:

    Do people really think that NYS is falling behind because our taxes are too low? I think it actually is a scandal that as wealthy as we are; and as high of taxes as we do have, we still have rates of poverty that are relatively high. We should have some of the lowest rates in the nation if our taxes actually did what we claim that they do but we don’t. We are the highest taxed state on a per-capita basis and yet we have a rate of poverty of 15.8% which puts us right in there with West Virginia in 2009 which has the same rate. So where are the taxes going?

    http://www.npr.org/templates/story/story.php?storyId=129908796

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  33. Jeanie says:

    Cuomo is being an irresponsible MEISER. I will side with the President on this one…Because really–the issue boils down to fixing the budget on the backs of either the:

    POOR/NEEDY VS. the WEALTHY/ABUNDANT

    WHICH IS MORE CONSCIONABLE?? To tax rich people that get out of paying their taxes anyway…And nonetheless can AFFORD to pay a higher tax…OR cut funds from Medicaid (ie, poor folk’s health insurance), financial aid for colleges, and impoverished schools struggling just to pay for text books?

    Regarding the proposed financial aid cuts–you should never…I mean NEVER EVER take away the chance for any individual to obtain an education!! Especially when the students are OUR future!!! Cuomo is being heartless and his budget proposal is merciless and flat-out WRONG.

    Clearly he is putting politics ahead of the welfare of the PEOPLE. He needs to be taken down a notch and be schooled on how to run a government without reckless abandon, incivility, and immorality.

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