Friday, April 06, 2007

Taxing Credulity

We are continued to be amazed at the failure of some of the brightest political observers to see that the high level of taxation faced by New Yorkers is the biggest barrier to the maintenance of the city's middle class. In yesterday's NY Daily News Errol Louis weighed-in on the Drum Major Institute's focus on the vanishing NY middle class, and highlighted the absence of affordable housing.

Now, Louis is absolutely right that the emphasis on affordable housing up until this time has been on the very poor, with formulas that exclude the folks being squeezed in the middle. He is also correct to point out that, "the soaring cost of housing and other necessities makes it harder than ever" for the middle class wannabes to attain the coveted status.

What's missing is precisely what the IBO has underscored: the high cost of living in the city that is driven by the astronomical levels of taxation. And the last thing that the gurus seem to want to propose is tax relief. Why? Because it would interfere with all of their expensive-and quixotic-educational and welfare schemes that are going to need cash on the barrel in order to move forward.

What's instructive here is that the leading cheerleader in all of this, DMI's Andrea Batista Schlesinger, has never met a tax she doesn't like or a tax cut that she approves of. When last heard from she was writing in the Wall Street Journal about the need to keep the estate tax. Her focus there was on billionaires, and by doing so she missed the point that the billionaires have more kinds of ways to protect there wealth than Snoop Dog has misogynist rap lines. She doesn't quite see that the average person wants the opportunity to do well in this country, and to pass on some of this bounty to her children. And why should people be taxed twice on the money they earned?

Which brings us back to our friend Errol. He's on point when he talks about middle class housing, and even when he hits a nerve with us on discount box stores, but affordable middle class housing also means reducing the city's real estate taxes so that homeowners aren't squeezed out into the suburbs. It also means reducing the cost of doing business for smaller neighborhood retailers so that it is possible for them to compete on as level playing field with some of the big boys (And by the way, making it easier for these entrepreneurs is another way to create a path to middle class status, since so many store owners also own homes in the city).

For us, it all comes back to your view of the role of government. Too many Drummmers and their elected acolytes want to expand the role of government. We remain greatly skeptical of the benign nature of the expansion effort. The role of government, in our view, is to help to create the conditions by which the citizenry can utilize their skills to the greatest effect, A helpful government needs to know when to step aside and let the folks do their thing.