Albany, NY — This year, New York’s deep-pocketed rich were required to dig even deeper to help shore up state finances.
They now pay higher taxes on their income and on limousines and yachts, more to enter a horse in a race and more to dabble in real estate. Meanwhile, many are losing millions from the closing of business tax loopholes and those making more than $1 million are losing tax deductions others get.
It even costs more to hunt foxes or pheasants and have their taxes prepared.
Now, a half-dozen states in this recession-driven movement are nervously eyeing New York to see if it’s wise to demand so much from people rich enough to have a second home in less taxing states — and for whom a change of address can be its own tax break.
Early data from New York show the higher tax rates for the wealthy have yielded lower-than-expected state wealth. Gov. David Paterson, who had always warned targeting the rich could backfire, fears that’s just what happened.
Paterson said recently that revenues from the income tax increases and other taxes enacted in April are running about 20 percent less than anticipated.
The concern about millionaire flight has prompted some states, including New York, New Jersey and California, to increase the highest tax rates only temporarily. For New York, it’s the second temporary increase for high earners since 2001.
The first one ended as scheduled after three years. But Paterson and economists warn that came as the economy began to grow fast into another boom, something that isn’t expected now because Wall Street — which historically provided 20 percent of state revenues — is perhaps permanently downsized.
“People aren’t wedded to a geographic place as they once were. It’s a different world,” said New York Lt. Gov. Richard Ravitch. He said last year’s surcharge on income taxes, set to last three years, won’t likely meet expectations.
So far this year, half of about $1 billion in expected revenue from New York’s 100 richest taxpayers is missing. The state budget office says losses suffered in the recession could be largely to blame, and it may still come in next year when filers exhaust their extensions.
Those seeking extensions nevertheless had to pay in April at least as much as they owed in 2008. The six-month extension for the balance ends in October, but given the hard times many filers likely didn’t earn much more than a year ago.
State officials say they don’t know how much of the missing revenue is because any wealthy New Yorkers simply left.
But at least two high-profile defectors have sounded off on the tax changes: Buffalo Sabres owner Tom Golisano, the billionaire who ran for governor three times and who was paying $13,000 a day in New York income taxes, and radio talk-show host Rush Limbaugh. Golisano changed his official address to Florida, and Limbaugh, who also has a Florida home, announced earlier this year that he was relinquishing his home in Manhattan.
Donald Trump told Fox News earlier this year that several of his millionaire friends were talking about leaving the state over the latest taxes.
Golisano, who created 5,000 jobs from his Rochester payroll processing company, Paychex, bristled when politicians said he was bailing on New York in the spring.
“If anything, New York state has bailed out on us,” he said.