Sunday, February 01, 2009
The Rich Guy's Tax:
The Sales Tax.0 comments
Now, this is a tax a rich guy can really get behind and support.
From the mid-Sixties, when this aberration first appeared in state budgets around the country, it's been a favorite of personally well heeled and connected governors for raising a ton of cash from the populace quickly.
Since then, it's been an unbearable hammer on people of weak to moderate means. It simply is the most regressive tax we Americans pay. Poor people and those who consider themselves to be "OK," foot the bulk of the bill. The affluent and mega-rich never even feel the pin prick.
And of course—in a time of short-fall created by the rich trying to be richer, aided and abetted by the greed of those grasping to climb up to "rich"—the richest mayor in America decides that the poor and the remaining vestige of middle-class folk must pay to repair the catastrophe his peers have saddled us with.Bloomberg calls for job cuts & sales tax hike
As we've said before, it's hard enough to watch billionaire Michael Bloomberg cavalierly lopping off of the city payroll thousands of jobs that, even in lush times, max out at what passes for subsistence wages for an expensive locale like NYC. Mayor Wallet says: Take that $40,000 job, and shove it!
But then for him to propose ravaging these people further by raising the most onerous tax on the books—the Sales Tax—from 8.375% to 8.75% is unconscionable.
Doesn't sound like a lot, does it? Hey, what's 0.375% among friends, hunh? It raises that bunch of cash quickly, and doesn't hurt anyone particularly hard, does it, right?
Wrong.
Example
Take a mythical Alex Smith, the cop, the fireman, the teacher, the functionary in City Hall, making $40,000-$60,000 a year.
Compare him to the very alive Alex Rodriguez, the Yankee, the rich guy, the model of massive NYC money, making $25,000,000 a year. Yes, that's $25 million a year.
Let's go shopping!
Alex-@-40K needs a suit (for his kid's christening or Bar Mitsvah, whatever), so let's say he decides to splurge on a good one (how many suits do most guys buy these days, after all?) and spends $500 on a suit. The sales tax on that suit currently comes to $41.87, for a total cost to Alex-@-40K of $541.87. (What else Alex-@-40K could use that $41.87 on is for another discussion.)Alex-@-25M wants another suit for his closet, since he's in the public eye often, and needs to look good for business reasons. So, he spends $6,000 on a beautiful suit that makes him look and feel like a million bucks, which is a number he can certainly understand. The sales tax on this suit comes to $502.50, bringing the total paid to $6,502.50.
The first, easy thought—and one the rich pols who push this tax point out—is that Alex-@-25M's $502.50 is so much higher than Alex-@-40K's paltry and affordable $41.87, that the system MUST, by definition, be fair to all, both high- and low-estate. Richer folk can afford a higher sales tax hit on the expensive luxury items they buy; the simple folk pay a much lower amount since they buy cheaper crap, um, items—so it must be fair.
Mayor Wallet proposes a sales tax hike from 8.375% to 8.75%. So, the same principle should hold, right? The rich pay much more; the rest pay more, but less?
Not so fast. Let's look at some numbers...
Under Bloomberg's new budget, Alex-@-40K's tax on his $500 suit rises $1.88 to $43.75. Alex-@-25M's bite jumps $22.50 to $525.00.
Let's look at impact.
Alex-@-40K's $1.88 comprises .00376% of his $40,000 salary (much higher, obviously, if he's among the laid off on unemployment).
Alex-@-25M's $22.50 amounts to .00009% of his $25,000,000 salary (a guaranteed contract, so they pay him whether he works or sits home).
So, Alex-@-40K ends up receiving 42X the negative impact on his income from Bloomberg's increase than sexy, rich A-Rod-@-25M endures.This is nothing new. It has been always thus: The rich of the city slide all of the downside of city living onto others while they fully enjoy the benefits of the urban landscape.
But this isn't onerous simply because of the unfair bite to the incomes of a city full of Alex-@-40Ks. It goes directly to the buying power of the general populace of an entire city. And here's where the short-sightedness comes in. This hurts businesses across the board, and directly deducts from the economic lifeblood of Gotham.
The extra bite of the sales tax, and increases thereof, digs into the finite total that any of the Alex-@-40Ks of the city can afford to spend. These are the "kitchen table" Americans you hear pols bloviating about and pandering to recently. These are the people sitting at the kitchen table, scratching their heads, swallowing hard, staring at the numbers in front of them as if they'll change somehow, wondering who they'll put off this month to get themselves to next month.This sales tax rise alone may mean someone may or may not make a purchase at all, or scale back the level of item they purchase. At some point, Alex-@-40K thinks hard about that $500 suit; maybe he grabs one at $200 on sale, and hopes he can get by with it for a while, as the city's engine loses $300. Or maybe he doesn't buy the suit at all, throws the money on his rent or mortgage payment and dry cleans his sports jacket. The city ends up $500 poorer—multiplied by every transaction all day long that 7.5 million people out of a city of 8 million people don't end up making, or end up downgrading. Serious change, that.
Further, the Alex-@-25Ms of this city spend more that $22.50 to whiten their teeth in the morning. Whether any particular drop in the ocean is $502.50 or $525.00, it's still a drop in the ocean.
Now..., again, a plan.Close every conceivable loophole in the tax code. Then by raising Alex-@-25M's taxes to a level commensurate to the impact of what Alex-@-40K pays to the city (and state and feds), that budget deficit closes to a small enough number so that just a few of Mayor Wallet's richest friends, those whom he bumps into at all of the city's fine charity balls, can simply write a check or two, and the city would be fine. [As an addendum, the Mayor could/should really get his pen warmed up, as well.]
In a crisis, NYers band together like nowhere else in the world. At least, most of us do. This time, that civic responsibility is going to have to include those city residents who "have someone on my staff who handles all that for me."
Then, we would have a city we can all be proud of.
posted by Gotham 4:22 PM
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