BILL NUMBER: S2522

SPONSOR: RIVERA
 
TITLE OF BILL:

An act to amend the tax law, in relation to extending the top state
income tax rate

 
PURPOSE:

The purpose of this legislation is to amend the New York tax law to
introduce an additional tax on investment income (capital gains), for
the purposes of correcting the unfair federal tax benefit for income
earned from investing rather than working.

 
SUMMARY OF PROVISIONS:

Section 1 amends the tax law to add a new section 601-b to impose an
additional tax on low-taxed investment income. Provides that low-taxed
investment income shall refer to the amount of a persons New York State
taxable income attributable to long-term capital gain, dividends, or
other income taxed under the preferential rates of section 1(h) of the
              

internal revenue code. States the way in which additional tax imposed
shall be calculated and determined. States the specific individuals in
the State of New York who this section shall not be applied to. Provides
the provisions of this section shall be administered and penalties be
imposed in the same manner as tax imposed under section 601 of this
article. Provides that the Department be tasked with adopting rules and
regulations to implement this section.

Section 2 provides for the effective date.

 
JUSTIFICATION:

New York is an exceptionally wealthy state. Treated as a separate coun-
try, it would have one of the world's largest economies. With such a
strong economy, all New Yorkers should have fundamental economic rights:
access to high-quality education, affordable healthcare, guaranteed
housing, and basic social services and social insurance. New York must
also finance investments in green energy, green jobs, and green infras-
tructure in order to mitigate the catastrophic risks of climate change.

Unfortunately, New York is also the most unequal state in the nation.
In part this is because our tax system has not kept pace with changes in
the economy, leaving the many high-earning professionals and wealthy
families in this state undertaxed. Economic growth from recent decades
has overwhelmingly benefitted a small segment of elites, while infla-
tion-adjusted wages have stagnated for the vast majority of working
people since the 1970s. The state government, lacking adequate tax
revenues, has been unable to afford essential public investment and
social spending, including upgrading our infrastructure, repairing
public housing, protecting public education, and financing Medicaid.

Most people earn their income from working. Those able to save and
invest can earn a little additional income from investing in stocks and
bonds, though typically far less than they earn in wages. For the weal-
thy, this situation is reversed. Wealthy people, by definition, have
significant accumulated wealth. They can invest their wealth in stocks
and bonds, real estate, art, and other assets that appreciate over time.
These assets can be liquidated for cash, or used to collateralize loans
that finance personal consumption or further investment. The profits
made from selling investment assets are known as capital gains.

For many decades the federal income tax has imposed a much lower tax
rate on capital gains than on wage income. Often rationalized as an
incentive for investment, it is one of the starkest examples of how
federal tax policy openly favors the rich. In addition to the manifest
unfairness of taxing investors less than workers, this tax handout
deprives the federal government of desperately needed revenue.

New York can respond to regressive federal tax policy. When the federal
government gives a handout to the wealthy or the big corporations, New
York should counteract it. There is no need to artificially separate
state and federal governance. Where the federal government forfeits tax
revenues, New York can recover them.

By imposing this additional tax on capital gains, New York can raise
significant additional revenue, reduce economic inequality, and bring us
closer to a fair and just tax system

 
LEGISLATIVE HISTORY:

This bill was introduced as A10120 during the 2019-2020 legislative
session.

 
STATE FISCAL IMPLICATIONS:

This bill is projected to raise 7 billion dollars annually in revenue.

 
EFFECTIVE DATE:
This bill is effective immediately upon passage.