NEW YORK // The millionaires of New York have gone to battle. On one side are Donald Trump, the property mogul, and Rush Limbaugh, the right wing radio talk show host, who have threatened to quit the city over higher taxes. On the other is a group of top earners who actually want the state to force them to help the have-nots.
New York, like the rest of the country, is trying to balance shrinking revenues with increasing welfare demands as the recession bites into every facet of US life. A so-called "millionaire's tax", part of the new US$131 billion (Dh480bn) state budget, is being closely watched by other states also grappling with tight finances.
David Paterson, the state's Democratic governor, wants to raise the marginal tax rate from next year to 7.85 per cent for three years for single filers who earn more than $200,000 and for couples who earn more than $300,000.
The rate would increase to 8.97 per cent for those earning more than $500,000.
Right wing critics point out these figures fall far short of $1 million incomes and create additional burdens on the middle-class, not just the superwealthy.
Mr Trump said the rich would flee and that he was looking at Florida, which has no income tax and raises revenue from property sales, also hard hit over the last year.
"A huge percentage of New York City taxes come from the people that will be fleeing New York. And you just can't do it. It is a horrible thing," he told Fox television this week. "I have spoken to literally 25 to 30 people that are now either leaving or going to consider leaving. It is a foolish and in fact very stupid thing [the state is] doing."
When Mr Paterson heard Mr Limbaugh, an influential conservative, wanted to quit the city, the governor said: "If I knew that would be the result, I would've thought about the taxes earlier."
Mr Paterson was urged on his tax-raising mission by more than 80 wealthy New Yorkers, who sent a letter last month asking him to boost their state income taxes.
"I've been pretty lucky and I've always felt that a disproportionate share of the tax burden falls on lower-income people," said Chet Opalka, a philanthropist and founder of a biotech company, who signed the letter along with groups such as Responsible Wealth, New Yorkers for Fiscal Fairness and the Fiscal Policy Institute.
"In these times, it's important for the haves to take care of the have-nots."
California and Maryland have already made its top earners pay more in tax. Other states under pressure to consider similar moves include Connecticut, Delaware, Hawaii, Illinois, New Jersey and Wisconsin.
"Many states look to New York as an example of what to do," said Dan Levitan, a spokesman for the progressive Working Families Party, which welcomed Mr Paterson's budget. "They could have done more in the budget and it's far from perfect, but we were able to prevent the worst cuts to health and education. It's a step towards fairness and provides relief for people who go to a hospital, public school or library."
He dismissed as "political grandstanding" the threats to leave New York City by Mr Trump and Mr Limbaugh. "Most people don't move when an extra couple of hundred dollars are going to hospitals and teachers."
Studies have failed to offer much evidence that tax hikes spark any significant flight of millionaires, although there is concern about a "brain drain" because businesses and entrepreneurs might be more adversely affected.
A Princeton University study on tax increases imposed in 2004 by New Jersey saw 350 existing "half-millionaire" households leave out of a total of 44,000 such households.
New York was paying the price for its reliance on Wall Street revenues, which have dramatically dropped in the last year but would get back on track eventually, said Justin Phillips, a political-science professor at Columbia University.
"It's best to compare New York with California or Massachusetts, states that offer similar cultural amenities and the most competition, which are also looking at higher taxes because of the need to come up with additional revenue," he said. "New York will be OK as long as its taxes don't end up a lot higher than elsewhere."
Voters have yet to be convinced, however. Some 60 per cent of New Yorkers disapproved of the new budget, according to a Quinnipiac University poll this week.
Another 65 per cent said Mr Paterson had not shown political courage in making difficult decisions in the budget, which was reliant on several billion dollars in federal stimulus cash. Most observers expect the budget's numbers to be redrafted over the course of the year.
Mr Paterson faces an election next year while Michael Bloomberg - who will also see his tax bill rise - faces the polls this summer when he seeks a third term as New York City mayor. Both men are closely tracking public opinion and they might be heartened by the New York Post's assessment that Mr Trump was unlikely to move anywhere soon.
"If you believe that he'd really move his empire and, more importantly, his board room to Palm Beach, then you probably believe his hair is naturally orange," the tabloid said.