PrintJuly 20, 2009
The Champion's Tax
Let me tell you how it will beThere's one for you, nineteen for meCause I'm the TaxmanYeah I‘m the Taxman-The Beatles
The New York Post ran a sensationalized headline Wednesday morning, the first in many years, implying that rich New Yorkers would balk at a new federal healthcare surcharge that would bring the combined federal, state and city income tax to 59% for the great privilege of living in New York City, as proposed by Congressman Rangel. The surtax would help pay for healthcare for the "46 million without health insurance" and could return New York City to its rightful place as Number One in the nation for taxing rich folks.
Never mind that the actual number of uninsureds with no access to affordable healthcare plans may be just 10-12 million, or 3% of American citizens (after excluding illegal immigrants, children who already qualify under SCHIP, seniors who already qualify under Medicare, the poor who already qualify for Medicaid and families earning over $50,000 per year who voluntarily opt out). And further never mind that many of this 3% voluntarily opt out because they prefer the safety net of free emergency room care for uninsureds over expensive prepaid medical plans. This 3% compares with the 15.9% of under/unemployed, most of whom might prefer to be employed and uninsured versus insured and unemployed.
I think the Post underestimates how civic-minded New Yorkers can be, especially when they are celebrities doing more good. I mean, why shouldn't rich New Yorkers help more, especially when, according to the New York Times, Medicaid fraud in New York has been reduced to only several billion dollars per year?
So, looking briefly at the latest incomes of the top movie and sports celebrities, it can be reasonably estimated that the top 10 athletes and actors had combined incomes of about $4 billion last year, leaving them unfairly with over $1.5 billion of after-tax income assuming Congressman Rangel's proposal sticks. Once we know how deep their pockets are, no more need be said to justify a special superduper federal surcharge of an additional 35% to further promote wellness, healthcare and special acai diets.
Also, no need for traditional New York residency requirements for the new higher State and City taxes. All we need to do is expand jurisdiction so that anyone appearing in a Page Six gossip column qualifies for New York State and City taxes. This celebrity tax, which I'll call the Champion's Tax, could be the first tax where people coveted the right to pay it, having as it does elements of nobility and recognition. Clearly, just like the expansion of the Hall of Fame, there would be pressure, particularly from the athletes, to expand this tax to the top 100, and eventually the top 1000, thereby voluntarily expanding the tax base.
I know it sounds harsh to impose a marginal tax rate of 94% on people like Madonna and A-Rod, but they'd still be after-tax millionaires, even if just barely. Also, there is precedent for it, and how positive it can be. For example, the Beatles did their best work under an even higher 95% marginal taxation regime and God knows we could use a return to a world with more melody, harmony and romance. The Taxman, for example, (quoted above) was a terrific song inspired by the 95% marginal tax rate.
The other good thing about Congressman Rangel's proposal is what it would do to bring the value of the New York City real estate market and the net worth of the wealthy back in line with the national averages. Of course, Congressman Rangel might not have considered this added benefit since he himself rents four rent stabilized apartments.
Higher taxes always make the tax shelter of real estate a relatively more attractive asset class, don't they? How this interacts with the combined New York City tax burden, the new higher New York City property taxes and the New York City post bank meltdown economy will no doubt be interesting.
And, needless to say, someone like Bono would never dream of organizing their affairs to live where taxes are lowest. In a similar vein, it is unlikely that the richest New Yorkers would ever consider leaving New York just to avoid taxes. It would be unfair to leave to the uninsureds and the undocumenteds in the unknown abyss of paying for themselves. People might call the rich "traitors" for leaving New York.
"Traitor". This nasty word was used to describe Tom Golisano, who is now starring in the sequel to Kurt Russell's 1981 classic film, Escape From New York, saving an extra $14,000 per day just by moving to Florida. I am sure that if Golisano started the ball rolling by volunteering to be the first to pay the Champion's Tax, Congressman Rangel would be happy to throw in a free copy of the Beatles' The Taxman as the Champion's Tax Rebate.
