Tax rich Americans more? Driven by pandemic, New Jersey leads the way

Tax rich Americans more? Driven by pandemic, New Jersey leads the way

Will the pandemic allow the American left to realize one of its dreams by taxing the rich more heavily? The state of New Jersey has just led the way, which may encourage other Democratic states to follow suit.

Phil Murphy, the Democratic governor of this state of nearly 9 million inhabitants, wanted to increase the income tax of millionaires since coming to power in early 2018, without succeeding in obtaining the support of his Parliament.

But the pandemic has passed through there, which has killed nearly 16,000 people in this neighboring state of New York, exploded unemployment, closed shops and businesses, and deprived public coffers of several billion in tax revenue.

Like in other states, New Jersey's budget is no longer holding up. And local communities have been waiting for weeks, without result so far, for an injection of funds from Congress which, in the midst of the presidential campaign, is the subject of a showdown between Democrats and Republicans.

Against this backdrop, Phil Murphy and New Jersey Parliament officials announced Thursday that they have reached an agreement to raise taxes on their millionaires, who make up some 9% of households in that state – the highest concentration in the United States, according to the latest ranking from the Phoenix Marketing International institute.

For the 2021 fiscal year starting on October 1, the tax rate for any income over $ 1 million should therefore drop from 8.97% to 10.75% – the rate hitherto applied to income above $ 5 million. of dollars.

Escape from millionaires?

The revenues thus generated (estimated at some 390 million dollars) should make it possible to pay 500 dollars to families whose incomes do not exceed 150 000 dollars annually (with one child).

“The Covid has really exposed the inequalities,” said the governor, himself a former Wall Street figure after more than 20 years of career at Goldman Sachs, on Friday.

“It is a good thing in general, and even more so in this time of health and economic crisis, to ask those in a good situation to help us invest in the middle classes,” he added on Fox. News.

While the Wall Street Journal, with very conservative editorials, quipped Friday about an upcoming flight of millionaires from New Jersey to nearby Connecticut, Mr. Murphy was serene.

“It is real estate taxes”, not income taxes, “which can change the mind” of people, especially retirees, he said.

An idea that rises

The New Jersey agreement risks fueling the debate on whether to tax the rich more heavily in other states, including New York and California: their finances are also drained by the pandemic, and lawmakers there were already considering projects in this direction.

Especially since the idea of a heavier taxation of the rich has been progressing on the Democratic side for months, and had been at the heart of the primary campaign: the most left-wing candidates, Bernie Sanders and Elizabeth Warren, advocated heavy taxes on the richest as well as on the profits of large companies, in particular to finance their projects for free higher education or health coverage for all.

Although less radical, Joe Biden, who will face Donald Trump for the presidential election on November 3, also says he wants to increase taxes for “anyone earning more than $ 400,000”.

“The very rich must pay their fair share and companies must pay their fair share”, he repeated at the end of August, at the risk of fueling the attacks of Donald Trump and the Republican camp who describe him as “a Trojan horse of socialism », A term marked far to the left in the United States.

But even if the context is favorable, Lucy Dadayan, an expert on tax policy at the independent think tank Urban Institute, believes that the Democratic states will not rush to follow New Jersey's example.

“These are heavy decisions,” she said. Even if “we are at a time when politicians are looking for ways to generate income without harming the most vulnerable (…), much will depend on the severity of the economic crisis, and on whether or not government aid is released. federal ”.

As for the risk of taxpayer flight for less heavily taxed states, which often comes up in this debate, she believes that it should not weigh in the equation.

In a time of increasing pandemics and natural disasters, “many taxpayers are more likely to (decide where to live) based on the capacity of states to manage these crises,” she said.

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