[Correspondent Diary] COVID-19 and the Wealth Tax Increase Among New York's Rich

Andrew Cuomo, Governor of New York State
Photo by AP Yonhap News

[Asia Economy New York=Correspondent Baek Jong-min] The novel coronavirus infection (COVID-19) is opening Pandora's box of 'wealth tax' in New York.

Despite pouring massive funds into COVID-19 prevention and treatment, there is no sharp solution to the problem of reduced tax revenue caused by the economic recession.

New York is the state most severely affected by the COVID-19 crisis in the United States. Governor Andrew Cuomo of New York State made efforts to curb the spread of COVID-19, often clashing with the federal government. Cuomo gained nationwide recognition by successfully controlling COVID-19 through proactive measures such as mandatory mask usage, stay-at-home orders, and school closures.

Recently, he expressed the view that even if the federal Congress approves support for state governments, tax increases are inevitable.

The projected deficit for New York State's current fiscal year, which began on April 1, is $8.7 billion. Civic groups warn that New York's deficit could reach twice the expected amount.

Governor Cuomo stated, "Even if Congress provides additional budget support, tax increases are inevitable. The question is how much to raise."

Half of New York State's tax revenue comes from personal income taxes. Income tax revenue for this fiscal year is estimated at about $60 billion. The targets for tax payments and rate increases are the wealthy. The top 2% of taxpayers bear half of the total income tax burden.

If tax increases occur, it inevitably leads to higher tax rates on the wealthy.

The highest state income tax rate for New York State residents is 8.82%. Additionally, New York City residents must pay a city tax of up to 3.8%.

Nearby New Jersey is also pushing for tax increases targeting high-income earners. The plan is to raise the income tax rate for those earning over $1 million annually from the previous 8.97% to 10.75%.

In the United States, residents pay taxes not only to the federal government but also to the state where they reside.

The problem is that due to the COVID-19 crisis, many billionaires are making an 'exodus' from New York, and major companies are relocating their headquarters.

Investment bank Goldman Sachs is considering moving its asset management division to Florida. Elliott, known as an activist private equity fund, also plans to relocate its office to West Palm Beach, Florida. Famous investors Carl Icahn, Paul Tudor Jones, and David Tepper have also left New York.

The Republican Party opposes wealth tax increases, fearing that higher taxes on the wealthy will trigger their migration and worsen the tax revenue shortage.

The tension between authorities needing to increase tax revenue and wealthy individuals trying to avoid additional taxes has already begun. President Donald Trump is a case that has already acted on such concerns. Last year, President Trump changed his residence from New York City to Florida.

This content was produced with the assistance of AI translation services.