Thursday, December 18, 2008

Taxing Arguments

With both the state and the city poised to sock it to the tax payers, it's an opportune time to examine the dueling arguments. On e one side are the folks from the WFP and the DMI who believe that more taxes are good, as long as the "rich" are doing the paying; which is what the Working Families head Dan Canto has been promoting his millionaire's tax.

On the other hand, there are those, and we put ourselves in this category, who believe that New Yorkers at all levels are overtaxed-and it's government costs that need to be controlled. EJ McMahon frames this argument: "SHORTLY before Gov. Paterson unveiled his 2009-10 Executive Budget, one of his aides reportedly warned of "aggressive . . . cuts" that would leave "blood in the streets." However - despite what he calls "staggering" deficits this year and next - the governor is not eviscerating Albany's bloated budget. In fact, state spending would grow slightly under his proposal."

And with the governor sallying forth with a plethora of new taxes, it would seem that all New Yorkers would say, enough! And the NY Post finds that sentiment aplenty in the city streets: "New Yorkers blasted Gov. Paterson yesterday for trying to sock them with a slew of new fees and taxes that could cost them an extra $100 a month...Meghan Mackay, 37, a school consultant who lives on the Upper West Side with her husband and four sons, will have to cough up an additional $118.75 a month for everyday expenses under the tax-hike plan. Paterson's budget proposal adds $6.70 to her monthly cable bill, $10.05 to her gym membership and $16.75 to her cab fares. "I feel like it's a sneaky way to get people to pay taxes," Mackay told The Post."

But the counter side sees it somewhat differently: "But many state Democrats yesterday vowed to replace many of the Paterson budget's more than 130 tax-and-fee proposals with a sweeping new tax on the rich. Assemblyman Jonathan Bing (D-Manhattan) and others said the fees were unfair - setting the stage for a bruising conflict with the freshman governor. "A lot of them are regressive and will put the burden of difficult economic times on those least able to handle it," he said. "It doesn't make sense to tax a guy who buys a Pepsi with his lunch, but not tax the Pepsi executive who makes $13 million a year."

This, of course, reflects the Working Families position; but why is it being made into a class oriented zero-sum game? Why isn't Bing focusing in on the size of government and its grandiose spending? As the Post points out in its editorial: "By now, of course, everyone knows the private sector is hurting. And job losses are expected to get worse - much worse - over the next two years statewide. Yet, get this: State government employees are largely exempt from layoffs - even as private-sector job losses are driving Albany's biggest cash shortfall ever. Talk about a disconnect. Gov. Paterson wants to pink-slip, at most, a mere 520 staffers - a meaningless target, given Albany's 240,000- employee headcount. But by his own admission, this "would still represent . . . an increase of 8,927 compared to 2003-04." Fact is, the state headcount has been growing at a hefty clip: At 239,830, it's up 3.4 percent in just the past two years - and at the highest level since 1991."

It is unfair to tax the construction worker's can of Pepsi; but it's counterproductive to the economic growth that the construction worker depends on, to tax wealthy New Yorkers who are economic stimulators. When we talk about fair share, we tend to forget just how high taxed an environment New York is.

The problem is that the special interests that rule Albany are not alone-many New Yorkers are addicted to government; as long as someone else is seen as paying the bill; as Irene Liu points out: "But it isn't just the special interests who want tax increases instead of cuts to health care and education. According to a Siena Research Institute poll released Wednesday, 61 percent of voters support a tax increase on those making more than $250,000 (31 percent oppose it). Even more voters (78 percent) support a personal income tax increase on those making more than $1 million. Without broad-based taxes hikes, a majority of voters oppose cuts in education (68 percent against) and health care (65 percent)."

So we're going to need an elected official to come along who is strong enough to explain the economic facts of life to the voters-without, in the process, committing political suicide. If that person doesn't come forward, it might take economic collapse like we saw in the 1970s to force feed change on a tax addicted state.