We have learned time and again that austerity during a recession can result in prolonged pain and a delayed recovery. Nonetheless, Gov. Kathy Hochul has repeatedly used the threat of a looming recession to justify her hopes of not raising income taxes on the richest New Yorkers this session. With the budget process underway, the question of taxes is especially urgent. But whether or not a recession materializes, Governor Hochul is invoking the false and dangerous argument that taxation of any type will hurt New York’s economy. In our current economic environment, it’s more important than ever to make sure we fund the public goods and social insurance that vulnerable families need to recover from the hardships of the pandemic and ongoing inflation. Contrary to the governor’s rhetoric, raising income taxes on top earners will not contribute to a recession – it will help reduce its severity. It is far past time to raise taxes on the rich and restore the robust public goods our state needs.
Over the past three years, a barrage of painful economic impacts have hit the working class. The pandemic, high inflation, and now a high interest rate environment and possible recession have all disproportionately sandbagged lower-income families and communities. And the past few years are just the tip of the iceberg. New York is now the most unequal state in the U.S. thanks to decades of attacks on labor power and tax cuts at both at the federal and state level. We also rank second in number of unhoused people and second in cost of living. Over 40% of adults in the state reported difficulty paying regular monthly expenses this fall. Meanwhile, New York has one of the highest concentrations of millionaires and billionaires in the world.
There is no excuse for policymakers’ failure to meet the needs of and provide security to New Yorkers. Governor Hochul has wielded the threat of a recession as a strawman to avoid taxing the rich. But the state could raise tens of billions of dollars by just marginally raising taxes on the top 1% of New Yorkers alone. If a recession is approaching, it is at least in part because of the monetary policy we're using to fight inflation. In this environment, financial assets – where the wealthy make most of their income – will actually see higher returns during a period of high interest rates (i.e. will profit off others’ pain). By raising tax receipts the state could provide much-needed funding for vital public infrastructure and increased social insurance for the New Yorkers who would suffer the most in a recession – all without having any negative impact on the economy. If we fail to tax them, we will be forcing the working class to bear the brunt of a downturn, pricing more vital workers out of the state and weakening our economy in the long term.
Proposals like the Invest in Our New York (IONY) coalition’s policy platform and DSA’s #TaxTheRich campaign show the kind of progressive policies we need. Bold investments in our communities and infrastructure are how we strengthen the economy over both the short term and long term, while improving public safety for all.
For instance, while Governor Hochul’s plans to stem the housing crisis rely on incentives for big developers, the #TaxTheRich campaign and IONY propose direct spending that would improve public infrastructure and provide housing security for those in need while growing the economy. The campaigns’ universal child care proposal would greatly relieve family expenses, empower more parents to enter the labor force, and bolster wages. And the campaigns’ proposal for union-built, publicly-owned clean energy would reduce energy prices, create family-sustaining jobs, and help secure a more thriving and habitable state for future generations. These policies provide an important model for building an economy that improves employment, safety, and sustainability across all incomes.
Instead of letting the state’s wealth sit idle and accrue value for the ultra wealthy, we must put some of those gains towards public goods that strengthen New York’s economy and put the state in a better position if a recession does materialize. Governor Hochul and other fiscal conservatives use the threat of a recession to thwart the direct public spending New Yorkers need, because it serves the interests of the ultra-wealthy donor class. But these arguments are fundamentally wrong about the real economic mechanisms at play. Instead of avoiding tax increases on the rich, we must implement them now so that we can build a sustainable, just, and thriving economy for all New Yorkers.
Emily Eisner is a PhD economist and organizer with the New York City Democratic Socialists of America.