‘Buffett Rule’ ruins things for many New Yorkers – By George J. Marlin

 The following appears in the October 7-13, 2011 issue of the Long Island Business News:

There is a subset of self-made billionaires who, in their twilight years, strive to be loved by liberal political movers and shakers.  They yearn for the New York Times editorial page to declare that they “have grown”—in other words, have adopted leftist ideological nostrums.

Mayor Michael Bloomberg is an example of such a person.  In his drive to please Manhattan opinion makers in the chic Upper East Side and the radical Upper West Side, he has endeavored to create a nanny city that micromanages people’s every day behavior.  To score brownie points—actually given the Mayor’s obesity campaign that would be soy points—with this crowd, the Mayor, speaking at the opening session of the U.N. on September 20, chose to urge delegates to lead a worldwide crusade against global tobacco giants.

Let’s see:  the Middle East is a tinderbox, Iran is developing a nuclear bomb, the Palestinians are pushing for statehood, Europe is on the verge of financial collapse, but an anti-smoking offensive is Mayor Bloomberg’s number one international concern.  How absurd is that?

Another billionaire seeking love is 81-year old Warren Buffett of Omaha, Nebraska.  Buffett, who is the world’s third richest person and worth about $50 billion, supports Obama’s plan to raise taxes on those making over $200 thousand because he believes he is under-taxed and pays a lower tax rate than his secretary.

Buffett is dead wrong.  Contrary to what has become known as “Buffett’s Rule,” high earners do pay more than the average middle class taxpayer.  Those who reported incomes over $1 million in 2008 paid on their adjusted gross income an average tax rate of 23.3 percent.  Earner’s between $100 to $200 thousand, paid an average of 19.6 percent, $50 to $100 thousand—8.9 percent, $30 to $50 thousand—7.2 percent.  The Wall Street Journal rightfully called the “Buffett Rule,” that CEOs are routinely paying lower tax rates than their secretaries, “Omaha hokum.”

If Buffett gets his way, the impact on New York will be devastating.  That’s because a disproportionate number of high income earners live in the state.  Right now New York’s wealthiest, the top 1 percent earners, generate over 40 percent of state income taxes.  If the federal rate goes from 36 percent to 39.6 percent, the combined federal state and local tax rates will exceed 52 percent.  This will drive the wealthiest, who can afford to move, to neighboring lower tax states—Connecticut, Massachusetts and Pennsylvania—or to the state income tax-free states of Florida, Texas and New Hampshire.

In a radio show interview on September 24, Governor Cuomo appeared to agree with this analysis saying, “We are in a competitive foot race every day with our neighboring states.  And people are mobile.  If you just keep raising taxes, people will move.”

Another serious objection to the “Buffett Rule” is that the cost of living in New York is significantly higher than other parts of the nation.  A report released in 2010 pointed out that a Dallas, Texas household living on $125 thousand annual income must earn $250 thousand to live the same lifestyle in New York.  That’s an incredible cost of living differential.  That explains why even our senior U.S. Senator Chuck Schumer, whose National Taxpayers Union Rating is a dismal 2 percent, is leery about the “Buffett Rule.”  “$250 thousand makes you really rich in Mississippi,” said Senator Schumer, “but it doesn’t make you rich at all in New York, and there ought to be some kind of scale based on the cost of living on how much you pay.”

New Yorkers are the highest taxed people in the nation.  And higher federal taxes will only drive up labor costs, discourage new investment capital and increase the states already alarming out-migration.  If Buffett believes he is under-taxed, instead of sticking the tax bill to struggling New Yorkers, he should write a check of his own to the “Gifts to the United States” fund established in 1843.

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