State policymakers are seriously considering an important policy option: Income tax increases on the wealthiest families in their states.
New York is about to impose higher taxes on individual taxpayers with annual incomes over $1 million and couples with incomes over $2 million. California’s governor and others in the Golden State have issued proposals for new tax rates on their wealthiest residents. Legislators in New Jersey have vowed to push again to reinstate that state’s millionaires tax, an idea that polls show is increasingly popular, despite a promised veto from that state’s governor. There are also proposals in Maryland and Washington that would reinstate or create taxes on high-income taxpayers.
There are compelling reasons for this increased interest:
- States need the revenue from such taxes to reverse some or all of their recent deep cuts to education, health care and other areas important for sparking economic growth.
- Such taxes are a reasonable response to the problem of widening income inequality and reduced mobility and opportunity.
- The doomsday predictions that modest state tax increases on the wealthy few would cause them to leave have proven unfounded.
In short, raising taxes on a state’s wealthiest households can avert or reverse cuts in important services and also address the problem of income inequality, without negative effects.