New York State Proposes Billionaire Mark to Market Tax Act
Commentary by Steven Lofchie
A New York State Tax Law Senate Bill ("S4482"), which would establish a "billionaire mark to market tax," was referred to the State Budget and Revenue Committee on February 5, 2021.
The Act would require that New York residents - as defined by Section 605(b) of New York Consolidated Laws - with net assets of at least $1 billion, as of December 31, 2020, "shall recognize gain or loss as if each asset owned by the individual taxpayer were sold for its fair market value on that date," with resulting net gains, up to the phase-in cap amount, included in the income for the 2021 tax year. The bill specified that any legal provision reducing the asset's value (e.g., a poison pill) would be disregarded. Further, for purposes of determining a person's net worth, the State attributes to the person any asset given or donated within the past five years.
Additionally, the bill would require amendments to, or the creation of, New York personal income tax forms to provide for the reporting of gains by assets. Such forms would have to be filed by (i) taxpayers listed as billionaires on published lists and (ii) taxpayers with an adjusted gross income summed over the previous ten years in excess of $600 million.
Commentary
As a practical matter, billionaires tend to have choices, including as to where to live. Before the pandemic, New York City was a fairly attractive place to live. Right now it is less so. New York State currently has a maximum tax rate of 8.82%. This bill would effectively substantially raise and accelerate the New York State tax rate imposed on the very rich 113 who live in the state. (New York City also imposes income taxes.) By contrast, Florida does not have a State income tax. See State Income Tax rates.
How many of those 113 were already considering moving away? How many more might consider it with these added taxes? That is something for the managers of the governmental unit to consider. (And of course, it is not only the 113 who may consider moving if the costs of staying are sufficiently high.) See also SIFMA Opposes NYS Stock Transaction Tax.
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In a letter to New York State officials, SIFMA and 26 other organizations expressed opposition to "any form" of a New York State Stock Transaction Tax.