By: Alan B. Lubin, Executive Vice President of New York State United Teachers and BALCONY Board Member
Sunday, April 30, 2006-Albany Times Union

When it comes to state income taxes, what do gas station attendants or retail clerks, struggling to pay bills and keep their homes, have in common with billionaire Donald Trump?

Well, because of New York’s misguided tax policies, Donald Trump and middle-class teachers, salesmen, auto mechanics and cops in the Capital Region pay state income taxes at the same rate.

Working families worrying about their rising property taxes and Wall Street’s wealthiest financiers, who worry about whatever multimillionaires worry about, pay the same top rate of 6.85 percent, a tax bracket that kicks in at just $40,000 in adjusted income for married couples.

New York State United Teachers is pushing state leaders to restore sanity and balance to the state’s tax code. It’s the best and fairest way to lower the property tax burden on Capital Region residents and ensure that public schools, in Albany and elsewhere, are properly funded.

A study by the Fiscal Policy Institute, a Latham-based, union-supported economic think tank, shows that if New York would simply revert back to its 1972 tax brackets and tweak them to adjust for inflation, it could give 95 percent of New York families a tax cut, while generating nearly $8 billion more each year in state revenue. That money could be used for better roads and bridges, crime prevention, public education and meaningful property tax relief.

During the last 20 years, much of the income growth in New York and the United States has been concentrated at the top end. During the last two decades, a huge gap has opened between the rich and poor, to the point where New York now has the most unequal income distribution of any state.

Because of New York’s imbalanced tax burden, the super-rich – those in the top 5 percent of earners – have laughed all the way to the bank, enjoying huge tax breaks while the poor and middle class have benefited very little.

How so? Since the 1970s, the state has gradually flattened the state income tax brackets to provide tax relief to people who don’t need it. In 1972, New York had a progressive tax code with 14 brackets, ranging from a low of 2 percent to a high of 15 percent. It provided fairness to the poor and middle class, and it expected the biggest earners and richest families to pay a little more. After all, the state figured, they could well afford it.

Now, however, there are just five brackets and five tax rates, ranging from 4 percent to 6.85 percent, and middle-class families are stuck paying higher taxes than they should.

According to the Fiscal Policy Institute, the compressed brackets mean a family of four with an income of $50,000 is paying about $1,000 more in income taxes a year. The biggest losers are families earning about $150,000 a year. Those families pay about $2,500 a year more under the current five-bracket, 6.85 percent tax code than they would under the 1972 tax code, with 14 brackets and a top rate of 15 percent.

On the flip side, a wealthy family earning $500,000 is now paying $22,000 less a year in taxes than it would under the 1972 code, while those earning $1 million are saving an additional $63,000 a year.

The Business Council of New York State is opposed to income tax reform. It represents big corporations who pay their CEOs millions of dollars a year. Don’t buy for a New York minute that old canard that raising the income tax would drive business out of state.

Frustration in the Capital Region over rising property taxes is understandable. Yet, most would agree that public schools in this area, as a whole, do a terrific job. Cutting school programs, laying off teachers and voting down school budgets isn’t the answer.

Capital Region residents who want good schools as well as meaningful property tax relief can get it. All they have to do is demand a state income tax code that is fair to all.