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The
Rich Must Share the Burden
No
one needs to be lectured on the many ways in which the economic
state of our state is a mess. New York, like nearly every
state of the country and sector of the economy, is reeling
from overspending and massive debt, and no serious observer
questions the need for bold action to keep the state from
going further into financial free fall. Most New Yorkers welcome
brave leadership from Albany, leadership that demands fiscal
responsibility and shared sacrifice, and it looked, briefly,
as though that was what we were going to get from Gov. David
Paterson.
Indeed, Paterson appeared to be such a leader when, in July,
he bluntly laid out the economic crisis facing the state.
The accidental governor demonstrated a comforting willingness
to discuss our fiscal challenges, and reassuring prescience
in calling upon the Legislature to abandon any fantasy of
forestalling the inevitable and to switch their thinking to
crisis mode. Remember, this was still weeks before Fannie
Mae and Freddie Mac were brought under the heel of the federal
government, before Lehman Brothers collapsed into bankruptcy,
and while the talking heads were still trying to write off
the Bear Stearns bailout as an anomaly.
The governor deserved praise then, and he would have deserved
praise Tuesday when he delivered to the Legislature, one month
early, a $121 billion budget that holds growth at 1.1 percent.
Before unveiling this behemoth spending plan, Paterson proclaimed
that all New Yorkers must prepare to share in the pain of
recovery.
We would have praised his boldness and political bravery had
that been true. Unfortunately, in meeting the challenge of
what he called the largest deficit the state has ever faced,
the governor failed to deliver New Yorkers the fiscal and
social responsibility the times demand. Instead, he has balanced
his budget on the backs of the middle and lower classes.
Amid billions of dollars in cuts to funding for senior assistance,
education, Medicare, housing assistance, local municipalities
and so on, the governor proposed billions in new taxes and
hidden fees that will have a disproportionate impact upon
the budgets of the working class and poor compared to their
impact on the upper-middle class and rich. While it is true
that the governor has increased income taxes on nonresident
hedge-fund managers and on certain luxury items, like boats,
he has simply chosen to ignore another progressive method
that would certainly generate billions of dollars: increasing
the income tax of the rich.
Paterson has pitted himself against the vast majority of his
constituents in making no secret of his resistance to the
so-called “millionaire’s tax,” a slight increase in the personal
income tax of people in the higher income brackets. According
to recent polling done by Quinnipiac University, 77 percent
of New Yorkers supported increasing the tax rates by 1 percent
on the wealthiest New Yorkers.
This fall, with considerable Republican support and strong
opposition from the governor, the Assembly passed legislation
to impose a graduated tax increase that would have netted
$5 billion in new revenue—more than enough to throw out the
ridiculous “sugary drinks” tax, or perhaps to restore funding
to struggling school districts.
In April, Nobel Prize-winning economist and Columbia University
professor Joseph Stiglitz wrote to Paterson and other state
leaders, arguing for them to adopt the progressive millionaire’s
tax. He argued that when an economy is faced with a downturn
it is better practice to increase the taxation of the wealthy
than cut spending by the state. When the state cuts spending,
he wrote, the effect is felt immediately in the communities
where people have lost their jobs. People without jobs no
longer spend money; they forfeit on their mortgages, and so
on. It is the best strategy, Stiglitz wrote, to ask more of
the rich than to cut more from the poor.
Although the benefits of the millionaire’s tax might seem
obvious to Stiglitz and 77 percent of New Yorkers, there are
still opponents—people like Donald Trump and New York City
Mayor Michael Bloomberg—who claim that a higher tax will send
millionaires fleeing state borders. Even when we pretend that
this argument is more than just empty posturing, we don’t
have to look too far to discredit it. A recent study by Princeton
University found that in the wake of New Jersey’s similar
tax increase in 2004, there was absolutely no such drain.
In fact, in studying demographics, the Princeton researchers
discovered that the number of millionaires in the state actually
has doubled since then.
It is hard not to be cynical about the governor’s motives
for refusing to impose a graduated tax structure. Political
ambition seems to be at the heart of Paterson’s arithmetic,
weighing the possible outrage of the population against the
assured outrage of the millionaires who will bankroll his
2010 gubernatorial campaign. Regardless, for struggling New
Yorkers, the governor’s budget will be an unfair burden—and
a painful reminder that the rich always seem to avoid sharing
in the pain.
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