Some Democratic lawmakers push for wealth tax on New York billionaires

A growing coalition of unions, progressive advocacy groups and Democratic officials has endorsed a slate of six revenue bills, including a so-called mark-to-market tax on billionaires, which would require them to pay capital-gains taxes each year as their assets appreciate, even if they don’t sell.

The tax menu also includes increases to income and capital-gains taxes as well as a proposed tax on financial transactions. Gov. Andrew Cuomo, a Democrat, proposed a $1.5 billion income tax hike as part of his $193 billion budget plan, but hasn’t embraced a mark-to-market tax.

Democrats who control the state Assembly and Senate said all measures—including the mark-to-market tax—remain on the table in fiscal talks. The state faces an $8.2 billion deficit.

Opponents said the tax is unworkable and could drive away wealthy people who already pay a large share of state taxes. They also said the proposal might violate a provision of the state constitution, which prohibits ad valorem or excise taxes on intangible personal property, including securities.

Supporters said the mark-to-market tax would bring in the most revenue—an estimated $23 billion—in the coming state fiscal year that could be used to fund education and healthcare that would otherwise face cuts because of the pandemic.

“There is no excuse as to why our billionaires are not paying their fair share, and that they’re hoarding their wealth and using loopholes to escape their fiscal responsibilities," said state Sen. Jessica Ramos, a Democrat from Queens who sponsors the tax.

Currently, individuals are taxed on wage income, certain business profits outside of corporations and capital gains from the sale of assets. Some assets are also subject to postmortem estate taxes. The mark-to-market tax would require New York residents with a net worth of more than $1 billion to assess the fair market value of their assets on Dec. 31 of each year, and pay state income tax on any gains.

As an example, a person who owned securities with a fair market value of $2 billion at the start of one year and $2.5 billion at the start of the next would be charged 8.82% in state income taxes on the $500 million difference, even if the securities weren’t sold.

Ms. Ramos said she was interested in the mark-to-market tax because it would generate the most revenue during its first year on the books. For 2021, an individual subject to the levy would pay taxes on all of their assets, less their initial costs.

Personal income tax collections currently fund about half of New York’s operating budget, and are disproportionately drawn from the filers with the highest income. According to state officials, the top 2% of taxpayers—about 188,000 filers—account for just over half of the state’s income taxes.

Business groups and aides to Mr. Cuomo have said they are concerned that some taxpayers could leave the state if their taxes are further increased, especially after the pandemic demonstrated their ability to work remotely.

Scott Rechler, who as chairman and president of RXR Realty oversees a $20.5 billion portfolio that includes several buildings in Manhattan, said a mark-to-market tax could create perverse incentives for how capital is allocated.

“I think there’s rationale for the right taxes to be considered if there is a gap in the state budget," he said. “The question is, what are the right structures for those taxes to make sure they don’t have adverse consequences?"

Mr. Rechler declined to discuss his net worth, or whether he might be subject to the tax.

Ms. Ramos said fears of migration are unfounded, and that she continues to talk to colleagues about her bill, which is part of the union-backed “Invest in Our New York" campaign.

Ten other progressive officials endorsed the campaign’s multi-bill platform this week, which already has support from Democratic U.S. Reps. Alexandria Ocasio-Cortez and Jamaal Bowman as well as the Democratic Socialists of America’s New York City chapter.

Similar tax proposals haven’t gained traction at the federal level or in other states. U.S. Sen. Ron Wyden (D., Ore) proposed a mark-to-market tax in 2019, and as Senate Finance Committee chairman, he is poised to advance it this year. But he is still working on the details, and President Biden has proposed a different, less dramatic change to capital-gains taxation.

A spokesman for New York state Senate Majority Leader Andrea Stewart-Cousins said all the revenue proposals were on the table as lawmakers negotiated a budget, which is due before April 1. A spokesman for Assembly Speaker Carl Heastie, a Democrat from the Bronx, said “supply has to equal demand, so nothing is off the table."

The tax proposals will be discussed at a Tuesday budget hearing. Freeman Klopott, a spokesman for Mr. Cuomo’s budget division, said the administration believes the state constitution prohibits taxing unrealized gains.

James Wetzler, a former state tax commissioner, said the proposal was unworkable because it would be difficult to assess the value of assets like interests in private business or real estate each year.

David Gamage, a professor at Indiana University law school who helped draft Ms. Ramos’ bill, said the proposal was constitutional in New York because it taxed changes in the value of assets, not simply the value of assets themselves. He said the valuations were possible because the number of affected taxpayers was likely below 200.

“It’s only in recent years that governments around the world have started to realize that our existing tax rules aren’t working as applied to the superrich, so that reforms are needed," he said.

This story has been published from a wire agency feed without modifications to the text.