Monday, February 09, 2009

Taxing Stimulation

There is a broad-based labor effort to raise taxes on New Yorkers-at just the time when billions of dollars of stimulus money is expected to come into the state for the expressed purpose of allowing states and localities to avoid economy crushing levies. As the NY Post reports: "Efforts to raise income taxes risk prolonging the state's economic slump by permanently driving a generation of laid-off bankers, traders and other top earners out of the state, say some economists and tax experts."

Right now all we can see in the federal pork-a-thon stimulus package is money for education and health care, et al; but very little that will cut tax rates and stimulate business growth-particularly in New York. And certainly there's nada for the struggling small businesses that are being forced out in droves from the city's shopping strips.

Instead we get ad hominen attacks on the governor for not embracing the personal income tax hike: "Little more than a month into his first legislative session, Gov. Paterson has come under a ferocious attack from organized labor - earlier, bigger and more personal than those that buckled his predecessors. Enraged at Paterson's refusal to discuss an income-tax hike as an alternative to $9.5 billion in budget cuts, unions have opened both barrels on their longtime ally."

Paterson for his part appears shell shocked-with his office in disarray, and seemingly both unwilling and unable to counterattack: "The Paterson administration is slipping ever deeper into petty internal politics, Capitol insiders say, pushing the governor's worried fellow Democratic elected officials into self-preservation mode. Instead of undertaking what observers believe is a much-needed overhaul of his executive staff, Gov. Paterson is standing by as the infighting builds."

But let's be clear here; the so-called millionaire's tax is just a start-because even if it passes, the tax will fall far short of generating the needed cash to close a $13 billion budget gap. The NY Post's editorial captures this slippery slope: "The numbers don't lie: State budgeteers say that the number of millionaires statewide has dropped 18 percent since 2007, while their combined gross income has fallen by some $60 billion. Thus, while the millionaire's tax Silver pushed through the Assembly last year might have been expected to raise $2.6 billion a year, he's now speaking of revenues that may not hit $1.5 billion. That's still almost $12 billion short."

So, we can expect the threshold to move downward: "So: How deeply would an income tax need to reach to get the job done? Well, a temporary income-tax boost back in 2003 (when the state's finances were far less dire) hit New Yorkers making as little as $100,000 a year. And Silver's union friends are already hard at work dragging the tax debate in precisely that direction."

What a mess! State government is bloated and it needs to be seriously trimmed; instead we get the public employees spending millions to protect their turf at tax payer expense without any countervailing response from the state's chief executive, It's not good enough to talk semi-tough, but then allow yourself to get slapped around by what really is your overpaid staff. This seems like the worst of both world's; and a recipe for disaster-both for Paterson as well as the state's beleaguered businesses.