Income Inequality And The Politics Of Envy

Readers outside New York may find amusing the current back-and-forth between our mayor and governor over the politics of income inequality. 

New Mayor de Blasio upon his election called income inequality "the defining challenge of our time."   His number one proposal to fix it is to institute a universal pre-K education program, to be funded with a tax increase on "the rich," otherwise known as taxable incomes above $500,000.  Now, am I the only one to whom it seems like universal pre-K is an extremely odd way of addressing income inequality?  Even assuming that the pre-K education transforms large numbers of beneficiaries from non-earners to middle-class earners, that will only happen at a minimum about 20 years from now, and even if existing term limits are lifted, de Blasio will never last that long.  So there's literally no possibility of this program leading to any improvement in the income inequality statistics during his tenure.  Meanwhile, since the program is to be "universal," many of the beneficiaries will not be poor at all.  And at the top end, since taxes don't count in the measures of income inequality, the additional taxes on the high earners won't have any effect either.

But put all that aside.  A few days ago in his state budget proposal, Governor Cuomo comes out and says that he has found the money at the state level to fund the pre-K program without need for the tax increase, and by the way his program for the state is tax cuts (although not to marginal income tax rates) rather than increases.  At this point, you might think that de Blasio would declare victory and go home.  Wrong!  As reported by the New York Post today, de Blasio promptly made a speech pressing forward in his campaign for the tax increase, putting it in these terms:

I think of it in terms of following through on a commitment I made to the people of New York City, that they ratified with great energy and with a huge majority, that they want this to happen and believe this is the right way forward.

So his real "commitment . . . to the people of New York City" is not so much to reduced income inequality, or even to pre-K education, as it is to punish those evil 1 percenters for their apparent success.  It's the politics of envy.  He did make some noises about a more reliable income stream, but that could only be because he remains unaware of the crowding out that is about to occur in his budget from exploding pension and employee health care costs.

Of course, there are actually lots of ways to make more than $500,000 in a year without having it come in a form subject to those premium income tax rates.  For two good examples, we could look to none other than de Blasio himself and also his progressive firebrand City Council speaker Melissa Mark-Viverito.

In de Blasio's case, Crain's New York Business reports here on January 17 that new property assessment figures out from the City show that de Blasio's Brooklyn townhouse increased in value by $725,000 since 2006, of which $225,000 came in the last year alone.  No taxable income there!  I'm not saying there's anything illegitimate about that.  But when the day comes that Bill decides to sell that house, he will likely find himself in the hated one percent by virtue of a capital gain that has built up over many years.  More than a few of the one percent get there by the route of a one time sale of a long-held asset, more often than not a home.  Here is an article that tries to get a handle on how this and other such factors distort the income inequality statistics.

And then, as an even better example of how to get rich as a connected insider by means of income that doesn't count, we have Ms. Mark-Viverito.  Her dad was a well-off hospital executive down in Puerto Rico.  At a time when he had died but his multi-million dollar estate had not been disbursed, MMV was working for an advocacy group called Aspira at a salary of $50,000.  She then applied for a townhouse in Harlem being constructed under one of those "affordable housing" programs for "middle income" people.  According to the Post here, these particular houses were made available to people in the income range of $30,000 to $70,000, and theoretically cost $240,000 (but the government subsidized the loan).  Today, City records show that the house is worth $1.2 million.  She also has a tenant in the house, although rental income has not showed up on her disclosure form when running for office.  Has she reported the income to the IRS and New York State taxing authorities?  Anyway, as you can see, if you have the right connections, you don't really need to have taxable income to become rich in New York.  To me this is just another demonstration of why government subsidized "affordable" housing in Manhattan is about the worst possible public policy.  By the way, the recently-retired State Senator from our high-end Greenwich Village/Chelsea district also lived in publicly-subsidized "middle income" housing.

If you want to get a taste of how far the politics of envy can go, you might enjoy this article from Michael Totten, currently reporting on a trip around the rural parts of Cuba.  Even though nobody but the police in Cuba is armed, there are police checkpoints everywhere.  Why?  To be sure that nobody (except of course the connected elite) can have more than anybody else:

Police officers pull over cars and search the trunk for meat, lobsters, and shrimp. They also search passenger bags on city busses in Havana. Dissident blogger Yoani Sanchez wrote about it sarcastically in her book, Havana Real. “Buses are stopped in the middle of the street and bags inspected to see if we are carrying some cheese, a lobster, or some dangerous shrimp hidden among our personal belongings.”

If they find a side of beef in the trunk, so I’m told, you’ll go to prison for five years if you tell the police where you got it and ten years if you don’t.

No one is allowed to have lobsters in Cuba. You can’t buy them in stores, and they sure as hell aren’t available on anyone’s ration card. They’re strictly reserved for tourist restaurants owned by the state.

Well, they can all be poor together.  So can we, if we let ourselves succumb to the politics of envy.