Monday, June 29, 2009

Taxing Our Patience?

There has been a great deal of teeth gnashing over the continuing gridlock up in Albany; but isn't it time we looked at the bright side of all this wrangling? Let's start with that famous quote on the danger that legislatures often pose-and the one in Albany never fails to do: "No man’s life, liberty, or property are safe while the Legislature is in session” is a classic political phrase that popularly began with a New York court decision in 1866. The phrase has been applied to the legislatures of other states as well."

Which brings us to the Wall Street Journal editorial on the dangers that legislative overreach can cause-particularly in the area of taxation: "A decade ago all three states were among America's most prosperous. California was the unrivaled technology center of the globe. New York was its financial capital. New Jersey is the third wealthiest state in the nation after Connecticut and Massachusetts. All three are now suffering from devastating budget deficits as the bills for years of tax-and-spend governance come due."

All this as a result of a capricious disregard of just what undergirds the prosperity of any local economy: "These states have been models of "progressive" policies that are supposed to create wealth: high tax rates on the rich, lots of government "investments," heavy unionization and a large government role in health care...Has all this public sector "investment" translated into jobs? Not quite. California had the nation's third highest jobless rate in May (11.5%). New Jersey and New York had below average unemployment rates in May compared to the national average of 9.4%, but one reason is that so many discouraged workers have left those states. From 1998-2007, which included two booms on Wall Street, New York and New Jersey ranked 36th and 31st in job creation. From 2000 to 2007, the New Jersey Business & Industry Association calculates that nine out of 10 new Garden State jobs were in the government."

So the, "soak the rich" philosophy, best epitomized by the platform of the Working Families Party and the missives of the Drum Major Institute, hastens the kind of economic retardation that, while it erodes the tax base all over, is particularly hard on local small businesses-as one recent study highlights: "Consistent with the growing tax burden on small-business owners, as well as the growing body of evidence linking higher tax burden with limited entrepreneurial growth and higher closure rates, this study has found that tax problems constitute an important reason for bankruptcy filings for a sizable number of entrepreneurs."

So perhaps all is not lost when legislative gridlock paralyzes the state capitol-and if this had happened in March instead of June a whole host of new taxes wouldn't have been concocted in order to stick knives in the local economies all over the state; and let's not forget that the job killing Quinnberg sales tax hike is also in limbo as the legislature continues to squabble. We're happy to see stalemate, even if it affords the governor to pretend that he's looking out for the public interest.

Unfortunately for New York's tax payers, however, this stalemate will eventually be resolved. And the WSJ's mordant analysis is way too accurate for any real debunking: "So goes the real-life experience of progressive governance, with heavy tax burdens financing huge welfare states, and state capitals dominated by public-employee unions. Formerly rich states, they are now known for job losses, booming deficits and debt, wage stagnation, out-migration and laughing-stock legislatures."