Rich people, poor people

Mayor Bloomberg’s interesting framing of how rich people bring more money to the city’s budget, which helps the many poor people living in the city (yes, despite all the frenzy about hipsters in NY, 46% of New Yorkers’s live under 150% of the federal poverty threshold, or less than $35,775 for a family of four).

“Other cities have much lower inequality levels,” Mr. Bloomberg’s press secretary, Marc LaVorgna, said, citing Detroit and Camden, N.J. “Are those better places for low-income families to live? Or would they be better off if they had more wealthy people, and a larger income gap, to provide a larger tax base to support a police department that keeps low income communities safe, funds good public schools and pays for a vast social services network like we do in New York City?

New York City is one of a handful of major cities that levy a local income tax on money earned by city residents, but Bloomberg is also talking about the spending that wealthy people do in the city. The latter claim is arguably tenuous (much has been written about whether wealthy people spend more in a local economy than middle-class people, given the nature of consumption patterns). But the tax benefits of income taxes in particular are important, and Bloomberg is right to point out that the more money New Yorkers in (especially rich New Yorkers, since the more you earn the higher your tax rate). Income taxes are also more progressive then property taxes, and less subject to abrupt fluctuations in the property market. In New York for 2013, personal income taxes were the second highest source of tax revenue, after property taxes, and above sales taxes.

So…income inequality driven by the growth of income at the top can be spun as “good” for the city budget, but even a mayor like Bloomberg might want to think twice about using the words inequality and good too close to each other.