Life in New York is about to get very interesting. Like so many other states, New York is in the red, facing a budget deficit of $9bn dollars in the coming fiscal year. In response to that deficit our political leaders have thrown out the scalpel and are wildly swinging the axe on just about every public service you can imagine, from prenatal care to senior centres. The accepted wisdom is that there is just no money to be had so these cuts have to be. But the truth is that there are billions of dollars out there for the taking, if Governor Paterson or Mayor Bloomberg were willing to raise income tax on the richest of New Yorkers even by a tiny amount.
Wall Street has just had a bumper year with the top three banks who benefited from Tarp paying themselves almost $30bn in bonuses, higher even than their previous record in 2007. It seems reasonable to expect that a small portion of this windfall would be paid back in the form of income taxes to help out the people who are suffering now largely as a result of Wall Street"s wild behaviour. But for some bizarre reason the inflated salaries of New York"s wealthiest people are off limits. Instead the best the mayor and the governor can come up with is a soda tax that disproportionately affects poor people.
Don"t get me wrong, I actually think the soda tax was a good idea, both for health reasons as well as economic ones. But when the city and state are in the midst of a dire financial crisis, you"d would think that more imaginative solutions would be sought. Instead every city agency is being told to brace themselves for draconian cuts from which they may never recover.
The New York police department is going to see a 20% reduction in its force bringing it back to 1990 levels when crime was much higher than it is now. The fire department is at risk of losing 20 fire companies which the commissioner, Salvatore J Cassano, warns could lead to a reduction in response times. The department of aging"s budget may be slashed by almost one-third (pdf) which would mean closing down dozens of senior centres and reducing home care visits and meals on wheels services, a devastating prospect for elderly New Yorkers of whom one in three are drastically poor. The commissioner for education, David Steiner, has told Albany that the public school system will never recover from the proposed cuts. Library hours are to be reduced as are after-school programmes and as for anything to do with culture or the environment – as they say in New York, fuhgeddaboudit.
It"s more than a little frustrating to think that a small income tax rise for wealthy New Yorkers could substantially ease the pain that"s about to be unleashed on the rest of us. As it stands today New Yorkers who are single filers earning between $20,000 and $200,000 pay 6.85% in state income tax (pdf). In 2009 two new temporary categories were introduced so now single filers earning between $200,000 and $500,000 pay 7.85% and single filers earning over $500,000 pay 8.97%. So even with the two new temporary tax brackets, which were brought about amid much hoopla and the usual cries of socialism, a person earning $20,000 a year is paying just 2% less in income taxes than a billionaire.
It wasn"t always so. In 1972 the top tax rate was 15%, almost double what it is now when the city is in dire need of funds. On top of this non-progressive income tax structure, there are numerous other loopholes and revenue generators as outlined here (pdf) by the Better Choice Budget Campaign that would take the edge off our fiscal woes and seem like a much more sensible solution to the budget crisis than letting old people go hungry or making the streets less safe.
But the political will to take any of these measures evidently is not there, despite the fact that in a recent Quinnipiac University poll the vast majority of New Yorkers (56-38%) support raising taxes for the rich and the popular argument that all the millionaires will leave town if we upset them too much has been widely refuted. The real reason one has to suspect that politicians don"t want to tax the rich is that firstly they are rich themselves and secondly they need their rich friends to pay for their re-election campaigns.
Higher taxes will not drive rich New Yorkers out of town, but they would make the city and state more liveable for all of us, rich and poor alike.
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