Hidden in the New York state budget for this year, are two gems that benefit only the wealthy:
A provision to limit sales tax on yacht sales to only the first $230,000 in value of the yacht.
A provision to completely remove sales tax from aircraft sales.
Let's take a closer look below the fold.
In the grand scheme of things, this will equate to a very small portion of NY state and local sales tax revenues. Sales tax, after all, is a consumption tax, and the wealthy can only consume so many yachts and airplanes.
But start taking these carve-outs of various sorts and various tax types, add them all together, and what you end up with is a systemic issue with our entire system of taxation.
There's a reason why the working and middle classes feel overtaxed: they are. It is not entirely impossible for a middle class wage earner in NY state to end up with a combined effective rate for all taxes nearing 50% of their income, when one considers Federal and state income and payroll taxes, property tax, sales tax, gas tax, you name it.
Let's say the wage earner is single and makes $50k/year, with an effective income tax rate of 19%. Add in another 6.2% for FICA, add in 5% for NY state, a $5,000/year property tax bill on their $200k home (a rate of 2.5% of the assessed value, not uncommon in NY state) for an additional 10% effective rate for property taxes versus their income, 4% for sales taxes on their various purchases, and 1% for gas taxes.
What you end up with is a 45.2% effective tax rate when all tax types are considered.
Meanwhile, take your standard "Old Wealth" rich person. They might finagle a 12% effective Federal income tax rate like Willard Romney due to how they structure their income. Due to the cap on SS taxes, their effective payroll tax rate drops from 6.2% to maybe 3%. Their effective state tax rate is 3% due to similar loopholes in NY state income tax code as the Federal code. Their home is valued at $2M, but as they can afford high priced lawyers to fight their assessment each year, the assessment ends up being 1.5% of the homes value - $30,000, which works out to be an effective rate versus their $30M annual income of 0.1%. They make $500k in taxable consumer purchase in state each year, equating to $42,500 in sales tax, or 0.15% of their income. Gas taxes end up only being a few hundred dollars - so negligible that they are essentially irrelevant.
What's this add up to? A cumulative effective tax rate of 19.74%.
I believe this is a clear illustration why giving wealthy people sales tax breaks to buy their toys is a clear slap in the face to every New Yorker. Additionally, it's a damn good illustration of why the wealthy are not overtaxed in general, and instead, the reverse is true. The wealthy are significantly undertaxed while the middle and working classes are significantly overtaxed, busting the myth that we have a progressive system of taxation in this country.
As far as these tax breaks for wealthy people to buy toys, who benefits from them? Andrew Cuomos campaign donors, as usual.