RUSH: Here we are. We finally got there. The Andrew Cuomo New York state income tax crisis. I want to lead into this by using this as a teachable moment. The fact that we have to keep teaching this or informing, the fact that the people do not learn this is… Well, if you let it, it’s depressing. But more than that, it is extremely instructive in how we can never assume that issues are solved forever or for any substantive length of time, because we have an institution out there that is attempting to revise history and lie and break down every success that we have, to tell the American people that what just happened didn’t happen.
But we have fought these taxes-on-the-rich, class envy things. I’m into the thirty-first year of this program. It’s been a central part of this program for all 31 years. When Ronald Reagan assumed office, the top marginal tax rate was 70%. We had just had two recessions. Jimmy Carter, in his four years, had literally destroyed the United States economy in any number of ways. And Reagan instituted tax rate reductions which, after eight years, took the top marginal rate from 70% to 28% — and the amount of revenue that those tax rates created for the U.S. Treasury doubled. It was incredible.
Lowering rates from 70% to 28%, the top marginal rate 70% to 28%, doubled revenue. But that wasn’t the first time. The first time this happened was actually JFK in 1962! He gave a famous speech to the Economic Club of New York, in which he advocated for the reduction. At that point, the top marginal tax rate was 90%. Now, nobody paid that. We need to do a separate little class here on what marginal tax rates are, ’cause I guarantee you… I watched a tech blog video. Some snarky little tech guy thought he had figured it out.
He put together a video on to explain to other Millennials what marginal tax rates are, and instead of rates and brackets, he used pockets — like back pockets in your jeans — to explain the different brackets. “They’re not brackets; they’re margins.” By the time this guy’s finished, it’s no wonder Millennials have no idea what they’re hearing or thinking or what “tax the rich at 70%, 90%” really means. But my point is, we had people alive and kicking all throughout the eighties.
Ronald Reagan was known for cutting taxes and defeating the Soviet Union and rebuilding the U.S. military. Those are the three prongs, three legs of the Reagan stool. He succeeded at all of them. My point is that people were alive. They were living the economic rebound, the massive new number of jobs, rising wages, massive reduction in interest rates, home mortgages becoming affordable again, unemployment going way down! People lived it!
And they still, apparently, didn’t remember it, because by the time we got to 1992, Bill Clinton was campaigning on Reaganomics being “trickle-down — and Hillary, too. “Trickle-down economics! It didn’t work. It failed. It was tax cuts for the rich.” You’ve heard the drill, and that “only the rich get rich and the poor got poorer and the income gap widens and” da-da-da-da-da. “The rich aren’t paying their fair share.” Despite living through it, people were able to have their minds the changed about the value of tax cuts. It was stunning to me!
I thought back then, “Okay, we’ve won this one. People will finally learn the value of proper rate taxation.” Nope. The emotional appeal to class envy and resentment of people who have more than you, with a lot of people will overcome any sense of history, fact, or common sense. So here we are. We’ve had similar to the Reagan tax cuts with Trump. The same thing has happened. An economy that was moribund under Obama has been revitalized. It is growing like wildfire. Trump has renegotiated trade deals that have helped American manufacturing rebound.
It’s all good.
It’s all good!
But the Democrat Party and the media are continuing to savage the tax cuts to say that they have caused great harm, that they have resulted in a widening income gap. The rich are not paying their fair share. Now we’ve got a whole slew of young Democrat Millennials seeking new power on the basis, “The tax code is unfair. We gotta totally redo it. We need 70% tax on the rich, 90% tax on the rich.” If people learned — if people were able to learn and remember — these people would be laughed out of politics in their campaigns.
There ought not be any thinking, engaged American who hears “raise taxes on the rich to 70%” who does anything but laugh. Power of emotion. The power of emotion combined with envy and jealousy. Don’t forget the Democrat Party, the American left are all about hatred and promoting the feeling of hatred toward other people. So they capitalize on this, and they can’t afford for the tax cut reality to actually be learned. They can’t afford for the idea that people keeping more of what they earn actually causes the economy to grow.
They can’t afford for that to take hold! Every time I mention this, people say to me, “Rush, did you tell me that Reagan’s massive tax rate reductions caused revenue to the government to double?” Yes. Almost. It was, like, from $500 billion or $490 billion to almost $890 billion or $900 billion. So it was close to doubling, and people say, “But since the libs like Big Government, why don’t they accept this? Why don’t they like the fact that lowering taxes creates all this new money?” ‘Cause it’s not about funding government, ’cause they don’t care whether the government’s in debt or not.
What they care about is being able to talk about fairness and unfairness and envy, and the Democrats know that when you’re talking about the rich and the middle class, there’s about a thousand times more middle-class people than there are rich. In other words, there’s a thousand to 2,000 times more middle-class voters than there are rich voters, and so you keep bashing the rich even though tax cuts generate all kinds of new money for Washington.
I’ve even heard Democrats say, “It’s not about that. It’s about the rates. It’s unfair that some guy is only paying 28% when his secretary is paying 25%. It’s not fair!” “Yeah, yeah, that doesn’t sound right, Mabel. You know what? It doesn’t. We’re doing great here, Mabel, but maybe some other people aren’t out there.” This is how it all builds on itself. “Well, at some point — as Margaret Thatcher always said — the socialist are gonna run out of other people’s money. At some point, your taxation of the rich stops being taxation. It becomes confiscation.
When you start taking 70% of what people earn, even if it’s the marginal rate — and I don’t have time to explain what marginal rates are. But the 70% marginal rate is not 70% on everything — except for certain people, it is. Right now if you make over, I think, a million or million and a half, you pay the top rate on every dollar you earn. You don’t pay 10% on the first $5,000, 28% on the next $30,000. Those are the brackets. Those are the margins. The top margin is 70%. They want it to be. At some point, people are going to stop paying it.
They’re going to leave. They’re going to do whatever they can to avoid being financially raped like that, and this has begun to happen now in New York — and I am happy to say that I was at the forefront of the exodus in 1987. I played golf with President Trump on Sunday, and we talked about this. He was telling me so many people in New York he knows that are leaving precisely because of this. Well, Governor Cuomo was complaining about this just recently with the numbers.
And what Governor Cuomo has been forced to do is come out and directly contradict Alexandria Ocasio-Cortez. He is out saying (impression), “Raising taxes on the rich is stupid! It’s dumb. We can’t afford it. We can’t do it.” Just yesterday they put out a poll that said 70% of the American people support taxing the rich. The Democrats were cheering. Here comes Andrew Cuomo. Well, I’ll explain why, what has gone wrong in New York, what’s happened right after this. Don’t go away.
RUSH: New York state tax collections are down nearly $3 billion and budget concerns have arisen. “Gov. Andrew M. Cuomo on Monday announced a dramatic drop in state income tax revenue of $2.8 billion, which he says will prompt him to revise his 2019-20 budget and reconsider spending on schools, health care and repairs to roads and bridges.”
They’re not gonna have as much money to spend. “Cuomo blamed the shortfall on a federal tax plan backed by Republican President Donald Trump. Cuomo said the law’s cap on deductions for state and local taxes at $10,000 was to blame and suggested it is, anecdotally, triggering high-earners to leave New York.
“The hole in revenues in December, which some analysts have called a December surprise, and continued poor performance in January have created a $2.3 billion drop in anticipated revenues, according to the Cuomo administration. Add that to the $500 million drop in revenues for December that the Cuomo administration had previously projected and the revenue hole is $2.8 billion.”
Now, this thing they’re blaming on the Trump tax is called SALT and that’s the state and local tax deduction that was no longer allowed. And I love it, by the way. But Cuomo said it literally restructured the economy to help red states at the cost of blue states, which is exactly what it did. It was a diabolical political maneuver. Why should red states be subsidizing rich Northeasterners who are escaping the high tax rates that their states have imposed on ’em? Why should federal taxpayers be subsidizing these people?
If you’re gonna vote for people that are gonna charge you a top tax rate of 14% and then you’re gonna spend the rest of your life trying to avoid it, well, then don’t vote for it in the first place! But then don’t ask us to pay for it!
Cuomo warned that the loss of revenue could not be made up by continuing to tax the rich, the top 1% who already contribute 48% of all New York tax revenue. He said, “I don’t believe in raising taxes on the rich. God forbid if the rich leave.” Exactly. The top 10% in New York, who Alexandria Ocasio-Cortez says is not paying their fair share and all these other nit brains are not paying their fair share are already the top 1% are paying 48%. The top 1% is 93,000 tax returns. They have 31% of the income and they’re paying 48% of all the taxes, the top 1%.
Let’s go to the audio sound bites. Here is Governor Cuomo yesterday in Albany with a press conference on all of this.
CUOMO: SALT was an economic civil war. It literally restructured the economy to help red states at the cost of blue states. That’s exactly what it did. It was a diabolical political maneuver in the tax code. We are now seeing in the receipts the effect of SALT. The collections are down to about 30% of the target.
CUOMO: That is about a $2.3 billion drop in revenues, $2.3 billion as a drop at this point in revenues is as serious —
RUSH: He’s speaking for first graders here. I’m not gonna air number 9, I’m gonna tell you what he says in it ’cause I need to get to the meat. He speaks so damn slow. Just go nuts here. He said, “These changes fundamentally restructured our economy. People are mobile. They pick up their laptop and they move, they literally pack up their computer, they move to another state, you do business over the computer which means you’re doing business in that state, and you’re taxed in that state not in New York and we’re losing it, we can’t keep losing people this way.”
It’s not SALT driving out people, Governor Cuomo. It’s your own independent tax rate, your irresponsible spending and the fact that you’ve kept coming back and coming back and coming back and soaking the rich over and over and over again, and there’s nothing to show for it. You’ve got a crumbling infrastructure, you’ve got a widening income gap. You’ve got nothing to show for all this money that you’ve been collecting. So now here is Cuomo admitting what you never hear a Democrat admit, what you never hear a leftist admit.
CUOMO: 1% of the taxpayers —
RUSH: Speed it up!
CUOMO: — pay nearly half of all the taxes. The top 5%, 63% of all the revenue, the top 10%74% of all the revenue. Tax the rich, tax the rich, tax the rich. We did! Now, God forbid, the rich leave. Before SALT, a New York City taxpayer paid about 45%. After SALT, that tax increase goes up about 12%. A taxpayer in Florida would see no increase, probably would see a decrease, and Florida also has the advantage of no estate tax.
CUOMO: This is also going to be the tipping point.
RUSH: Right. And you don’t see Florida running out of money the way you people are with no state income tax and no estate tax. It’s why I fled down here in 1997. And here’s what the governor in 2009, David Paterson, said when he found out the reason I moved out of New York.
PATERSON: If I knew that would be the result, I would have thought about the taxes earlier.
RUSH: He was asked about me leaving. “If I would have known we could have gotten Limbaugh, I would have raised taxes sooner!” So I’ve been down here since 1997. My parents taught me never to talk about money, that it’s impolite, not good manners, rude, and all that. I would love to tell you — I was audited for 12 years by these people after I left. I had to prove 14 different ways for every day of the year where I was ’cause they did not believe me when I told them I was never there. You would not believe.
And so now I have a deal. Whatever I spend a day working in New York, I owe X. I would love to tell you what that number is but I’m not going to because I was raised properly. But I don’t go there. And it’s not the money. It’s the whole principle of the thing. It’s not that I can’t afford to go work in New York, it’s just that I’m not gonna give ’em the money. And that’s why I left in 1997, to all kinds of criticism that I was being selfish and not thinking of other people. Well, I was just however many years ’97 is from today ahead of the game.
RUSH: I got an email. I get a lot of emails, but I got an email. I saw an email during the break. It had an intriguing subject line. (That’s how I search them.) The upshot is, somebody said, “Mr. Limbaugh, how many times over the course of all the years of your program do you think that you have explained how trickle-down economics and tax cuts work?” I saw it and I thought that was a good question. And I began thinking. It has to be at least a hundred times.
What I went through in the last half hour, I’ve gone through a hundred times and more. I mean, I’ve explained more. That was tailored to the specifics of New York and Cuomo’s problem. But the concept of how tax cuts result in economic booms — which is not an opinion. It’s fact, as demonstrated by the American economy. I must have explained it easily a hundred times over all these years. The point the emailer was making was one I made, that it just doesn’t seem to hold.
People don’t seem to really grasp it even when they live through it. The knee-jerk reaction by now ought to be that if somebody starts talking about seriously reducing taxes, people (clapping) automatically applaud because of the resulting economic activity. Now, you reach a point where you can’t do that. I mean, you can’t lower taxes to zero, for example. Because every time taxes are cut, they creep back up. The top marginal rate’s not 28% like it was in 1989 when Ronaldus Magnus left office. It’s now 39%. It creeps back up there.
So you know what I’m going to do? I’m gonna attempt… Before I move on to other things, I’m going to attempt here to explain marginal tax rates because I saw this crazy attempt at doing it on one of my tech blogs. Some tech whiz was trying to justify Alexandria Ocasio-Cortez’s claim that taxing the rich would work and that it was morally fine and should be done. So this guy, being a groupie for Cortez, came up with a video to explain to other brain-dead Millennials why a 70% tax rate wouldn’t hurt anybody! (sigh)
All right. I’m gonna make up numbers here. I’m not gonna use the actual tax brackets ’cause I don’t have those actual brackets in front of me. I’m gonna pretend that there are five tax brackets that are easy to remember and we’ll do it at a bunch of different income levels. So we will say that the tax brackets are from $0 to $15,000 in income, the tax rate is 10%. Forget whether this is actually real. Do not get distracted and say, “That doesn’t sound fair.” That’s not the point here.
Let me write this down. So zero to 15K is 10%, and then we’ll say 16K to 25K is 30%, okay? And then we’ll go 26K to 75K is 40%. And then we’ll say 75K-plus is 50%. Now, these are not real. But what it means is if you earn $100,000 (and we’re talking gross here), the first $15,000 of it is taxed at 10%, not 50%. Just because you earn $100,000 doesn’t mean you’re paying 50% of it. You’re paying… On the first $15,000, you pay 10%. Then on the next $10,000, you would pay 30%. And then between $26,000 and $75,000 of your hundred grand, you would pay 40% — and then the margin.
Anything over $75,000, you’d pay 50%. So your number at 50% would be $25,000 in my example. If you earn a hundred grand, and anything over $75,000 is taxed at 50%, then the amount you make over $75,000 is $25,000. So only $25,000 of your income is taxed at 50%. Now, the marginal rates can be much higher. Ocasio-Cortez is talking 90% after you made a million or what have you. In the old standard tax codes, there were all kinds of deductions and shelters you could use to keep you from ever getting to that top marginal rate.
There’s the standard… The standard deduction is 12 grand for singles. So actually, the first $15,000, you’re paying 10% of $3,000, instead of $15,000. There’s all kinds of deductions thrown in here. But the point of the marginal rate, you’ve heard people say that it’s the last dollars you earn. The top marginal rate only applies to that portion of your income at the top of the income bracket threshold. Except there’s an exception now, and I think it’s a million, but it might be a little higher now. But if your gross income…
Let’s just for the simplicity of it, say your gross income is $1 million. You do pay 50% of everything, or whatever the top marginal rate is. You wouldn’t only pay 10% on the first $15,000 and then only 30% on the next $10,000. You would just get stuck because that’s been part of the soak-the-rich plan, and people have not… I didn’t learn about marginal tax rates or any other in school. I didn’t learn. I had to teach myself about them. I would hear about them in the news and the Wall Street Journal would happy describe:
“Yeah, the marginal tax rates are the tax rate on the last dollars you earn.” Well, what did not that mean? Okay. If I’m earning $20,000 a year, what…?” It didn’t apply to me because I wasn’t earning up to the threshold where the top marginal rate would even be applied. But the point that they were trying to make in referring to it that way is that not all of your income is subjected to the highest tax rate. Except now it is if your income is seven figures, and I don’t know what the exact figure is now. It was a million.
You didn’t get the benefit of any deductions. Oh, and then there’s the Medicare tax, and then there’s the FICA tax. I have not even talked about any of this. But these are just federal income tax rates. Now, Governor Cuomo was talking about this business here of the state and local tax deductions and what have you. But the top 1% in New York pay 48% of the entire New York state income tax burden, and the rate is around 12% to 14%.
But that then has to get added to what their federal rate is and then what their payroll tax rate is. New Yorkers at the top here are easily well over — and California, too — 60% of their gross goes to taxes. And that’s why you can’t just say that it’s because of New York alone that they’re leaving. Although New York alone is getting to be justification for leaving and people are leaving because of New York alone. But when you add all these other taxes up — and then in New York you’ve got EZ Pass.
They tax you when you come into the city; they tax you when you leave the city. They tax you if you park in the city. They tax you if you open your eyes in the city. They tax you if you sleep in the city. If you stay in a hotel, you better hope that some corporate entity is paying for it on an expense account. These taxing authorities, these people that run governments have acted like there’s no end to money at the upper end of the scale.
The rich are always gonna have enough that we can soak ’em, and they’re still gonna be able to buy their yachts, and they’re still gonna have a mansion in the Hamptons and a condo on Fifth Avenue and they’re gonna have a yacht somewhere at St. Barth’s. They’ve always believed this, that no matter what they do the rich are gonna sit there and pay it ’cause it’s such a privilege to be a success in New York.
Well, as Governor Cuomo is finding out, people are fleeing. And it’s not just the yacht rich. I mean, there are people who are being taxed into oblivion who don’t make a million dollars a year in New York, and those are the people that are leaving, not the people that have a home in the Hamptons and a home on Fifth Avenue and then maybe a condo in a high rise on Central Park South and then they own one of the buggies that takes horse trips through Central — that bunch of people is really not even Cuomo’s target.
It’s people that are not in that bracket but do qualify when liberals start doing the categories as “rich.” They’re the ones that are picking up and fleeing. The problem with that is that the people fleeing are a bunch of left-wing socialists, and they’re infesting places like the Carolinas and Texas and they’re taking their liberalism and they’re moving down to all these places, so much better off than where they’re leaving, and when they get there, they start implementing their same destructive liberalism that caused ’em to leave!
RUSH: You know, the best way to think about and remember marginal tax rates is one thing: the income tax, particularly the marginal rate, is the best evidence that the tax code is meant to keep people from getting rich. That is the express purpose of it, and particularly the top marginal rate. And that will get people interested. “Really?” Yeah. Income tax is — you’ll notice the rich are not paid salaries on the money they have.