Wall Streeters Don’t Balance New York’s Budget. Taxes on Wall Streeters Do

Clyde Haberman’s “What to Expect in New York in 2012″ contains what I realize is a throwaway line. But I can’t let it go because the sentiment it reflects is both pervasive and pernicious.

The local economy may feel the effects of layoffs in financial services this past year. Even hard-core haters of the 1 percent might come to appreciate the importance of Wall Street types to the public purse, not that many of them would ever say so publicly.

This line has rankled me for more than a decade—ever since Andrew Sullivan in 2000 (in an article that I unfortunately can’t find; the web was young then) derided Al Gore’s promise to raise taxes on the wealthy by snarking about “the top one percent, without whom there would be no surplus.”

Correction. Without taxes on the top one percent there would have been no (Clinton-era) surplus. This isn’t opinion. It’s history. The top one percent didn’t go away after George W. Bush lost won the 2000 election. In fact they did very well, due largely to capital gains. What went away was even the modest, Clinton-era level of taxation on the top one percent—and with it, the surplus.

If Wall Streeters want to, they can try to argue that what they do creates huge benefits for the economy as a whole. The narrower argument that they benefit Gotham specifically, by hoovering up profit that would accrue to the rest of the country and spending it in New York, would be somewhat more persuasive (though this argument, which might be called the “efficient-parasite hypothesis,” is for some reason rarely asserted in the first person). But if we’re talking about a contribution to the city, state, or national budget, it’s not their economic activity or anyone else’s that brings about that. It’s the taxes on that activity.

This point matters politically and matters a lot. “Class warfare” hysteria aside, very few who criticize the top one percent want them to stop existing (nor is there a shred of evidence that any mainstream progressive proposal would threaten their existence). We want them to face somewhat tighter regulations and substantially higher taxes. If you want Wall Street to contribute to “the public purse,” you belong on the side of Elizabeth Warren, not Donald Trump.

[Cross-posted at The Reality-Based Community]

Andrew Sabl

Andrew Sabl is a Visiting Professor in the Program on Ethics, Politics, and Economics and in Political Science at Yale University.