Bloomberg News

De Blasio Plan to Tax NYC Wealthy Faces Albany Roadblocks

January 03, 2014

New York Mayor Bill de Blasio

New York Mayor Bill de Blasio won election by the biggest margin for a non-incumbent in city history with a campaign that described a metropolis divided between rich and poor. Photographer: Spencer Platt/Getty Images

New York Mayor Bill de Blasio’s proposal to tax the rich to pay for universal early-childhood education faces obstacles in the state capital in a year when Governor Andrew Cuomo and lawmakers are up for re-election.

The new mayor’s five-year plan to raise the city income tax on residents earning more than $500,000 annually needs state approval. Cuomo, a fellow Democrat, and Republicans who run the senate with a group of breakaway Democrats both say they support de Blasio’s call for pre-kindergarten programs. Backing a tax increase to finance it, they say, is another matter.

“We have said we’re supportive of universal pre-K; the question is, how do you pay for it?” said Scott Reif, a spokesman for Senator Dean Skelos, the Long Island Republican who co-leads the chamber. Skelos has said there’s room in the city’s $70 billion budget to fund the program.

De Blasio, 52, won election by the biggest margin for a non-incumbent in city history with a campaign that described a metropolis divided between rich and poor. The first Democrat elected to run the largest U.S. city in 20 years, he says taxing the wealthy to pay for early childhood education would help close that gap. His egalitarian theme has already captured national attention. After a meeting on job creation and economic fairness with President Barack Obama and other newly elected mayors last month, de Blasio emerged as the group’s spokesman.

Soy Latte

The mayor’s proposal would generate $530 million over five years by raising taxes on income above $500,000 a year to 4.4 percent from almost 3.9 percent. For the 27,300 city taxpayers earning $500,000 to $1 million, the average increase would be $973 a year, according to the Independent Budget Office, a municipal agency.

Related: De Blasio Pledges to Focus on NYC Wealth Gap

“That’s less than three bucks a day -- about the cost of a small soy latte at your local Starbucks,” de Blasio said of the plan Jan. 1 when he was sworn into office by former President Bill Clinton. “We do not ask more of the wealthy to punish success; we do it to create more success stories.”

Alternative funding might be found in the state or city budgets, yet having the wealthy pay for the program fits the idea of ending the “tale of two cities” de Blasio described on the campaign trail, said Hank Sheinkopf, a New York-based political consultant.

The city’s richest 1 percent took home almost 39 percent of all earnings in 2012, up from 12 percent in 1980, according to the Fiscal Policy Institute, a nonprofit research group in New York.

“Unless there’s a tax on the rich, it will not achieve its goal,” Sheinkopf said.

‘Our Mission’

In his inaugural address, de Blasio said he wouldn’t wait to push his tax plan in Albany. He reiterated that point yesterday at a press briefing in Manhattan.

“I’ve been very clear about this -- this is a five-year plan,” de Blasio said. “It has to be sustained. We need all of the resources that we’ve asked for in order to sustain it, and the only way to do that is with a very specific and dedicated tax on those who make a half-million or more. That’s our mission, and we’re committed to it.”

To get the plan approved, de Blasio will have to navigate Albany, where both Cuomo and Skelos have said they want to lower property and corporate levies in a state with the worst tax climate for business in the U.S., according to the Tax Foundation, a Washington-based nonprofit research group. Cuomo appointed two commissions to study how to cut taxes.

Klein, Silver

Jeff Klein, the Bronx Democrat who co-leads the senate with Skelos, said in an interview that getting de Blasio’s plan passed is a priority for him heading into the legislative session that starts next week. Skelos must agree on any measure that comes up for a vote, though Klein said it ought to be part of the state budget for the fiscal year that starts April 1.

“In the legislature, we give localities taxing authority all the time,” Klein said. “This is not just taxing the rich for the sake of taxing them. The money goes to a very important place, to provide universal pre-K.”

Sheldon Silver, the Manhattan Democrat who leads the Assembly and supports the plan, also said it should be included in the budget.

“I have championed universal pre-K for nearly two decades now,” Silver said today in a statement. “I am fully committed to seeing Mayor de Blasio’s plan pass.”

De Blasio has a 20-year friendship with Cuomo, including years spent working for Cuomo when the governor served in Clinton’s cabinet as housing secretary.

“There’s no doubt that it’s the right idea and it’s where we want to go,” Cuomo told reporters Nov. 11 before marching up Manhattan’s Fifth Avenue in the Veterans Day Parade. “There’s also no doubt that money is tight nowadays. So that’s going to be the balance.”

Social Investment

Publicly financed pre-school for those who can’t afford it would reduce to about 29 percent from almost 36 percent the segment of the population that in the long run will be poor, according to a National Bureau of Economic Research study released in May. It would also boost the college graduation rate for children whose parents didn’t attend a university to almost 14 percent from about 10 percent, the study said.

“High-quality early education is one of the very best social investments we can make,” said Walter Gilliam, an associate professor of psychology at Yale University School of Medicine’s Child Study Center. “The economic investment pays off.”

Poll Support

A group backing de Blasio’s plan called UPK NYC includes Roger Altman, founder of Evercore Partners Inc. (EVR:US); Harvey Weinstein, co-chairman of the Weinstein Co.; and actress Cynthia Nixon, who starred in “Sex and the City.” According to the group, about $340 million of the money raised through the tax would be spent giving full-time education to almost 50,000 4-year-olds who are in part-time programs or none at all. About $190 million would provide almost 120,000 middle-school students with programs between 3 p.m. and 6 p.m.

Sixty-three percent of New York state voters support de Blasio’s proposal, according to a Nov. 27 poll by Quinnipiac University in Hamden, Connecticut. De Blasio won the November election by a 49-point margin. The new mayor will carry that support with him to Albany, and he’s appointed as his budget director Dean Fuleihan, who spent 16 years as a policy adviser to Silver.

“We have a huge wave of support after the election to pass universal pre-K, to get after-school for every middle- schooler and to do it by passing a tax on the wealthiest New Yorkers,” Emma Wolfe, de Blasio’s director of intergovernmental affairs, said at a press briefing last month. “We’re going to do it the same way we’ve always done it: There’s going to be a strong grassroots effort.”

To contact the reporter on this story: Freeman Klopott in Albany at fklopott@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net


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