Just substitute the word "United States" for "New York" or "New York City" and it's easy to see the trouble we are headed for!
APRIL 11, 2009
States are raising taxes despite the 'stimulus'; New York is No. 1.
Like the old competition to have the world's tallest building, New York can't resist having the nation's highest taxes. So after California raised its top income tax rate to 10.55% last month, Albany's politicians leapt into action to reclaim high-tax honors. Maybe C-Span can make this tax competition a new reality TV series; Carla Bruni, the first lady of France, could host.
They can invite politicians from the at least 10 other states that are also considering major tax hikes, including Oregon, Illinois, Wisconsin, Washington, Arizona and New Jersey. One explicit argument for the $787 billion "stimulus" bill was to help states avoid these tax increases that even Keynesians understand are contractionary. Instead, the state politicians are pocketing the federal cash to maintain spending, and raising taxes anyway. Just another spend-and-tax bait and switch.
In New York, Assembly Speaker (and de facto Governor) Sheldon Silver and other Democrats will impose a two percentage point "millionaire tax" on New Yorkers who earn more than $200,000 a year ($300,000 for couples). This will lift the top state tax rate to 8.97% and the New York City rate to 12.62%. Since capital gains and dividends are taxed as ordinary income, New York will impose the nation's highest taxes on investment income -- at a time when Wall Street is in jeopardy of losing its status as the world's financial capital.
But who and where are all these millionaires to pluck? More than any other state, New York has been hurt by the financial meltdown, and its $132 billion budget is now $17.7 billion in deficit. The days of high-roller Wall Street bonuses that finance 20% of the New York budget are long gone. The richest 1% of New Yorkers already pay almost 40% of the income tax, and the top 0.5% pay 30%.
Mr. Silver thinks he can squeeze more from these folks without any economic harm, arguing that recent income tax hikes didn't hurt New Jersey. (Yes, the pols in New York actually hold up New Jersey, whose economy and budget are also in shambles, as their role model.) The tax hike lobby in Albany points to a paper by Princeton researchers reporting that the number of "half-millionaires," those with incomes above $500,000, increased by 60% from 2003-2006 after New Jersey taxes rose (the top rate is now 8.98%). But this was a boom time for the national economy, especially in the financial industry where many New Jerseyites work, or at least used to work.
The better comparison is how New Jersey compared to the rest of the nation. According to the study's own data, over the same period the U.S. saw an increase of 76% in half-millionaire households. E.J. McMahon, a budget expert at the Manhattan Institute, calculates that New Jersey lost more than 4,000 high-income taxpayers after the tax increase.
Mr. Silver says of the coming tax hikes: "We've done it before. There hasn't been a catastrophe." Oh, really? According to Census Bureau data, over the past decade 1.97 million New Yorkers left the state for greener pastures -- the biggest exodus of any state. New York City has lost more than 75,000 jobs since last August, and many industrial areas upstate are as rundown as Detroit. The American Legislative Exchange Council recently said New York had the worst economic outlook of all 50 states, including Michigan. And that analysis was done before these $4 billion in new taxes. How does Mr. Silver define "catastrophe"?
Oh, and it isn't just high earners who get smacked. The new budget raises another $2 billion or so on top of the $4 billion in income taxes with some 100 new taxes, fees, fines, surcharges and penalties to be paid by all New York residents. There are new charges for cell phone usage, fishing permits, health insurance (the "sick tax"), electric bills, and on bottled water, cigars, beer and wine. A New York Post analysis found that a typical family of four with an income below $100,000 would pay more than $800 a year in higher taxes and fees.
This is advertised as a plan of "shared sacrifice," but the group that is most responsible for New York's budget woes, the all-powerful public employee unions, somehow walk out of this with a 3% pay increase. The state is receiving an estimated $10 billion in federal stimulus money, and Democrats are spending every cent while raising the state budget by 9%. Then they insist with a straight face that taxes are the only way to close the budget deficit.
And so Albany is about to make a gigantic gamble on New York's economic future. The gamble is that the state with the highest cost of doing business can raise taxes on everyone who lives, works, breathes, eats or drinks in the state and not pay a heavy price for it. If they're wrong, New York will enhance its reputation as the Empire in Decline State.
NYT: Cities turn to fees to fill budget gaps
'Streetlight user fees' among the new charges as governments get creative
By David Segal
The New York Times
Sat., April 11, 2009
After her sport utility vehicle sideswiped a van in early February, Shirley Kimel was amazed at how quickly a handful of police officers and firefighters in Winter Haven, Fla., showed up. But a real shock came a week later, when a letter arrived from the city billing her $316 for the cost of responding to the accident.
“I remember thinking, ‘What the heck is this?’ ” says Ms. Kimel, 67, an office manager at a furniture store. “I always thought this sort of thing was covered by my taxes.”
It used to be. But last July, Winter Haven became one of a few dozen cities in the country to start charging “accident response fees.” The idea is to shift the expense of tending to and cleaning up crashes directly to at-fault drivers. Either they, or their insurers, are expected to pay.
Such cash-per-crash ordinances tend to infuriate motorists, and they often generate bad press, but a lot of cities are finding them hard to resist. With the economy flailing and budgets strained, state and local governments are being creative about ways to raise money. And the go-to idea is to invent a fee — or simply raise one.
Ohio’s governor has proposed a budget with more than 150 new or increased fees, including a fivefold increase in the cost to renew a livestock license, as well as larger sums to register a car, order a birth certificate or dump trash in a landfill. Other fees take aim at landlords, cigarette sellers and hospitals, to name a few.
Wisconsin’s governor, James E. Doyle, has proposed a charge on slaughterhouses that would be levied on the basis of each animal slaughtered. He also wants to more than triple the application charge for an elk-hunting license to $10, an idea that has raised eyebrows because the elk population in the state is currently too small to allow an actual hunting season.
Washington’s mayor, Adrian M. Fenty, has proposed a “streetlight user fee” of $4.25 a month, to be added to electric bills, that would cover the cost of operating and maintaining the city’s streetlights. New York City recently expanded its anti-idling law to include anyone parked near a school who leaves the engine running for more than a minute. Doing that will cost you $100.
“The most dangerous places on Staten Island are the schools at drop-off and dismissal time, when parents are parked three deep in the road,” says James S. Oddo, a City Council member from Staten Island who voted for the measure. “There is a mentality here that Johnny can’t walk 100 feet, he has to be dropped off right at the front of the school — and frankly that’s why Johnny is as pudgy as he is.”
Nothing, it seems, is off the table. In Pima County, Ariz., the County Board of Supervisors increased an assortment of fees, including the cost of AIDS testing. Florida has proposed raising medical visit co-payments for inmates in state prisons. Parking fees at the Honolulu Zoo could rise by 500 percent if a proposal there goes through.
Politicians tend to regard fees as more palatable than taxes, and more focused too. If a state needs to finance an infrastructure to oversee fishing, why shouldn’t fishermen foot the bill? But groups like the nonpartisan Tax Foundation in Washington worry that governments are now using fees to shore up budget shortfalls rather than cover specific costs incurred by specific users.
“When it comes to paying for bananas, you’ve got the market as a mechanism to make sure you’re paying a fair price,” says Josh Barro, a staff economist at the Tax Foundation. “But when it comes to getting your driver’s license renewed, the government has a monopoly, and you have no idea what it costs the state or what it’s doing with the money.”
In some cases, towns say they are merely enforcing rules that have long been on the books. For the first time in years, for instance, officials at Londonderry, N.H., have mailed notices to dog owners reminding them to renew their annual dog licenses, which cost $6.50 apiece, or face a $25 fine. Town leaders think the get-tough approach could raise an additional $20,000, but Meg Seymour, the town clerk, is dreading local reaction. When the town last sent out fine notices, in 2002, the calls to her office were vicious.
“Let’s just say that we’re the ones who take the venting,” she said. “You have no idea.”
If past patterns hold, the new wave of fees is just getting started. Gary Wagner, a professor of economics at the University of Arkansas at Little Rock, was one author of a study of moving-vehicle and parking tickets in North Carolina, covering a 14-year period. He found a strong correlation between a dip in government revenue and a rise in ticket-writing by the police.
“But there’s a lag time,” Mr. Wagner said. “Typically, it’s about a year after the revenues drop that the police start writing more tickets.”
If you date the start of the downturn to last September, the ticket-writing is just getting under way. And New Yorkers can expect more days like the one in mid-March, when the police wrote 9,016 driving-while-phoning tickets within 24 hours, roughly 20 times the usual number.
The “accident response fee” idea could spread, too. A company in Dayton, Ohio, called the Cost Recovery Corporation specializes in setting up collection systems for municipalities that bill for police and fire responses. (The company keeps 10 percent of billings.) Inquiries have tripled in the last year, says the company’s president, Regina Moore.
“What we’re hearing from towns is, ‘The taxpayers are all over us; they don’t want to surrender more tax money,’ ” she said. “And response fees are basically a form of restitution, like paying for a stay in jail.”
Insurance companies loathe the idea, because inevitably customers assume that a crash fee is covered by their policies. (It isn’t, in most cases.) And unlike the pay-to-stay approach to jails, crash fees rarely play well in the media. The mayor of Duluth, Minn., backed off a crash fee proposal shortly after Jay Leno joked about the city, by name, in a “Tonight Show” monologue last year.
In Winter Haven, the accident response fee seemed to leaders to be a reasonable way to help finance the police and fire departments, but so far only 20 percent of the $32,000 that has been billed to at-fault drivers has been collected.
“We chose not to contract out the collection part of this, and frankly, because of staff cuts, we don’t have enough people to handle all the paperwork,” says Joy Townsend, the city’s communications officer. “We’re now evaluating how cost-effective this program is.”
Ms. Kimel, the S.U.V. driver in Florida, will not make the numbers look any better. She has no idea whether the city will come after her for that $316 bill, but she doesn’t care.
“I’m not paying,” she said, “because it isn’t fair.”
This story originally appeared in the The New York Times
Job cuts needed to stop NY bankruptcy: mayor
Apr 9 20009
Sweeping layoffs of government employees are needed to prevent New York going bankrupt, Mayor Michael Bloomberg said Thursday.
Bloomberg, who is in tense negotiations with municipal workers' unions, said an extra 7,000 jobs would have to go unless major reductions are made in employee benefits.
"We cannot continue. Our pension costs and health care costs for our employees are going to bankrupt this city," he said in comments broadcast on NY1 television.
Bloomberg, running for a third mayoral term at the end of this year, said that proposals from unions so far were "nowhere near what is adequate."
The possible job cuts, first announced Wednesday, would be on top of 1,300 already proposed and another 8,000 that could be axed through attrition.
Department heads have until Monday to propose cuts and Bloomberg must present the city budget by the end of the month. The city is barred by law from running deficits.
The recession and the Wall Street crisis have knocked a huge hole in city finances that traditionally relied heavily on taxes from financial companies.
The budget office on Wednesday said that 7,000 extra job cuts would allow the city to cut a further 350 million dollars in expenditure.