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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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