Former U.S. Treasury Secretary Lawrence Summers said New York state’s new budget deal, which raises taxes on millionaires, may backfire, especially if Congress doesn’t repeal the federal cap on state and local tax deductions.
Millionaires “deserve to pay more taxes — it should happen,” Summers said in an interview with David Westin on Bloomberg Television’s “Wall Street Week.” “But New York City and New York state can’t do it alone without substantial consequences in this environment.”
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Summers, who’s a paid contributor to Bloomberg, said he worried that, without greater federal deductibility, “this is going to do a lot of damage to New York’s tax base and set off a downward spiral.”
New York Governor Andrew Cuomo, a Democrat, this week announced a $212 billion budget agreement that will increase income tax rates to 9.65% from 8.82% for single filers earning more than $1.1 million and joint filers reporting more than $2.2 million.
Cuomo said he expects the tax hikes to be offset by a repeal of the $10,000 federal cap on state and local tax, or SALT, deductions. Yet it remains unclear if the SALT cap will be repealed.
Separately, Summers, who had criticized the Biden administration’s recent $1.9 trillion stimulus package for being excessive, repeated his praise for President Joe Biden’s plan for massive new spending plan for the coming eight years in infrastructure, green investments and some social programs.
“Frankly, I’d have liked see more traditional infrastructure in this package because I think we’re decades behind, and I’m not sure this is big enough to bring us to the forefront and I’m not sure there’s enough really major, large-scale projects,” he said.