By Gregg Easterbrook
The views expressed are his own.
New York Governor Andrew Cuomo just struck a deal with his state legislature for a long-term tax increase on the well-off, while California Governor Jerry Brown recently said he wants a November 2012 voter referendum aimed at raising the state’s top tax rate.
Conservatives predictably are in a tizzy, liberals in a transport of delight. Moderates might simply be glad to learn that California and New York are dealing with budget deficits on their own, rather than demanding a bailout.
Both states are moving to raise their top-rate taxes on personal income, making the rates border on confiscatory when one combines it with the federal and local taxes. Yet both are holding property taxes down. In June, Cuomo persuaded the New York state legislature to impose a cap on property taxes. California is entering its fourth decade of property taxes capped at a low level for most homeowners, under Proposition 13, passed in 1978.
Here’s the problem: Personal income is mobile — it can leave State A for lower rates in State B. Real estate cannot move: it must stay in State A.
Cuomo’s plan will raise the New York top rate income tax to 8.82 percent (a temporary “surcharge” about to expire was slightly higher). Meanwhile, across the state border, Connecticut’s top rate is 6.7 percent. For a well-to-do household, a move to the Nutmeg State might be very attractive.