Thirteen states tax Social Security benefits, a matter of significant interest to retirees. Each of these states has its own approach to determining what share of benefits is subject to tax, though these provisions can be grouped together into a few broad categories. Today’s map illustrates these approaches.
Connecticut has opened the door for a statewide property tax that has no upper limit. It offers a “new” tax revenue source for states such as New Jersey that have failed to address their structural deficits and continue to live beyond their means. Many New Jersey homeowners refer to their local property tax bills as a second mortgage, since the burden often rivals or exceeds the monthly payments on their home purchase.
A review of New Jersey’s modern history of taxes shows citizens should rightly be concerned.
Our state enacted a personal income tax in 1976 to support public schools and provide property tax relief. The tax began with a simple two-rate structure consisting of a 2.0% rate on income below $20,000 and a 2.5% rate on income above $20,000. In 45 years, 8 brackets have been introduced without any substantive update to account for inflation, making this more burdensome over time. The only meaningful change has been to establish a new top rate of 10.75%, the 3rd highest in the nation.
The state income tax eventually failed to stem the rise in the highest property taxes in the country since it was based on providing money to hundreds of de facto fiefdoms with no oversight. Ms. Egea goes on to speculate that Governor Murphy, with an even more pressing need for revenue, has another new tax in mind:
In 1976, New Jersey voters passed a constitutional amendment that dedicated the entire income tax to the Property Tax Relief Fund and lower property taxes in 1997 did help Brendan Byrne get reelected. There is no time for that this year so expect the massive debt and structural budget deficit to be the excuse for this new tax that should be hitting in 2022.
New York Gov. Andrew Cuomo (D) on Monday urged Congress to include repeal of the state and local tax (SALT) deduction cap in future legislation as House Democrats from the state are pushing to include such a repeal in an infrastructure package.
“Don’t pass another bill until you fully repeal SALT,” Cuomo said during a news conference.
Cuomo’s remarks came as he signed a state budget that raises state taxes for wealthy individuals and lowers taxes for the middle class.
The legislation Cuomo signed Monday raises the top state tax income rate to 10.9 percent for income above $25 million. It also continues phasing in tax cuts for middle-class households that were first enacted in 2016 and provides an income tax credit for certain homeowners with income up to $250,000.
New York’s top business leaders are gearing up for a potential mass exodus as Gov. Andrew Cuomo and state lawmakers prepare to raise their taxes.
With the state budget set to increase the personal income tax on the wealthiest New Yorkers as well as hiking corporate taxes, some executives who fled the city for Florida temporarily due to coronavirus pandemic lockdowns are considering permanent relocation, according to business leaders briefed on the matter.
Wealthy business leaders who have historically resisted moving at least some of their resources to Florida or other less-taxed states explained to CNBC that they are now seriously reconsidering as working from home becomes the norm, allowing more flexibility.
The budget deal Gov. Andrew Cuomo cut this week with the Legislature lifts the top marginal rate on the state’s income tax to 10.9%, from today’s 8.82%. Add New York City’s top local tax of 3.88%, and the total is 14.78%. Take a knee, California (top marginal rate of 13.3%), and recognize America’s new tax king. Wall Street types already are migrating to Florida, which has an income tax of 0%.
Mr. Cuomo’s budget deal also raises the business franchise tax to 7.25%, from 6.5%. This affects many independent proprietors and will be another incentive to escape from Manhattan. Both of these tax increases are sold as temporary “surcharges,” running through 2027 for the income tax and 2023 for the corporate tax. But politicians in Albany used the same line when they passed the “millionaires tax” in 2009. Does Mr. Cuomo think two decades is temporary?
The reason for the tax increase isn’t the pandemic or a revenue shortfall. Mr. Cuomo last year pointed a gun at New York’s head and threatened to shoot unless Congress sent more money. He received the ransom he demanded, and more. The state is getting $12.6 billion in direct budget relief from President Biden’s $1.9 trillion Covid bill.
The New York tax burden is already punishing enough. New Yorkers pay a greater percentage of their earnings to the state than residents of any other state. The total tax burden, on top of federal taxes, amounts to 12.79 percent of income, according to a new study. Opponents of the latest tax increases claim that the state’s punishing rates are responsible for driving high earners and businesses away, and indeed the state consistently faced massive levels of net outmigration to other states even before the pandemic. That migration has included thousands of jobs in areas like financial services. Among the firms that have relocated significant jobs away from the city are Credit Suisse, Barclays, UBS, and AllianceBernstein, according to a recent Forbes article. Goldman Sachs has moved a big-money management division to Florida, and hedge fund manager Carl Icahn has decamped there as well. The Empire State’s taxes are one reason that former hedge fund manager Leon Cooperman said, “I suspect Florida will soon rival New York as a finance hub.”
“Professor Young’s wealth migration analyses don’t capture the full breadth of tax flight by million-dollar earners,” said Andrew Mikula, co-author of “Missing the Mark on Wealth Migration: Past Studies Drastically Undercounted Millionaires.” “High-net worth households that do financial planning could move to another state before they sell million-dollar assets. They fly under the radar in Cristobal Young’s work because most of them don’t earn more than $1 million in the year before they leave.”
The graduated income tax proposal advanced by the Massachusetts Teachers Association, the Service Employees International Union, and other union, advocacy, and religious groups, defines earnings as including salary and capital gains on the sale of assets, which makes net worth a critical component of households subject to the tax.
New Hampshire and Massachusetts are fighting over whether the Bay State still has the right to tax the incomes of 103,000 former commuters now working from home in New Hampshire. But this tax spat deals with issues that spread far beyond the Massachusetts border — it has national implications and could impact millions of Americans.
Because of this, scores of tax organizations and states have filed briefs with the U.S. Supreme Court in support of the Granite State. In fact, an analysis by the National Taxpayers Union Foundation estimated at least 2.1 million Americans that previously crossed state lines for work are now working from home in accordance with public health guidelines.
A current example of California’s bipartisan capitulation to public employees is OPEB—formally, “Other Post-Employment Benefits”—chiefly, health insurance for retired employees and their dependents costing the state $10 billion per year. Those benefits are provided even when the retiree or dependent has another job that offers insurance, is covered by Medicare, or is entitled to premium support from the Affordable Care Act.
No other state in America showers such subsidies on retired employees, who are already entitled to the highest pensions in the land. But both parties have been obstacles to OPEB reform because both fear retribution from government employee unions. If you have any doubt about that, check out donations to legislators on both sides of the aisle.
Author(s): David Crane
Publication Date: 12 March 2021
Publication Site: Hoover Institution at Stanford University
Only the statutory contribution is not what the state owes to meet its obligation and prevent more debt. “Statutory” should be translated as the legislature made up a number and blew it out their collective butts.
The actuarial amount owed, the amount actually needed to keep from growing the liability is several billion more that the statutory amount.
They short the pension system every year, after year, after year, after year. And this year again.
New Democratic House Speaker Emanuel “Chris” Welch suggested Wednesday that the state should again ask voters to approve a graduated-rate income tax, but this time target the new money toward paying down Illinois’ massive pension debt.
The call for a do-over came after voters in November overwhelmingly rejected Democratic Gov. J.B. Pritzker’s graduated income tax proposal. Opponents, including Republicans and business leaders, used distrust of Springfield to argue for keeping the state constitution’s flat tax requirement.