NY budget hell
Quality of life in NYC is likely to deteriorate over the next few years as state/city governments make draconian cuts and/or raise taxes to balance their budgets. According to the Journal:
…New York finds itself in a particularly perilous spot because of its increasingly heavy reliance on the financial sector as its tax base. This summer, Gov. Paterson offered a stark example of the challenges: The top 16 banks paid $173 million of state taxes in June 2007, but that number fell to just $5 million this past June. And the financial sector generates one in five state tax dollars today, up from just 3% of state tax revenue in 1980.
The state’s budget division now projects a 35% drop in capital-gains revenue and a 43% decrease in bonuses. That alone would translate into a year-over-year decline of $20.7 billion in income, much of it taxed at the top rate.
Wall Street won’t have taxable income for years. And banks that survive will have tax loss carryforwards to offset profits for a decade. And big bonuses for bankers themselves are gone for the foreseeable future.
Already NYC subways and buses face significant cuts and fare hikes, including:
…[wiping out] the W line, zapping the Z line and axing more than 1,500 NYC Transit jobs…
…the $2 base bus and subway fare is on track to being raised to $2.50 or $3 without a state bailout.
To Governor Paterson’s credit he wants to balance the budget by making cuts, not by raising taxes:
Gov. Paterson has rejected calls for higher taxes on the wealthy — unlike New York City Mayor Michael Bloomberg, who has proposed tax increases.
“[T]he higher we tax even the wealthy, the more we lose population and the less job creation there is,” Gov. Paterson said in an interview Friday. “We’re pretty resigned to the fact that we’re going to have to do this with spending cuts.”
Paterson, the Democrat, would not raise taxes. Bloomberg, the former Republican, would. Already we pay CITY income taxes at rates between 2.5% – 3.7%, the highest in the nation I believe. We also pay STATE income taxes at rates between 5 – 7%. Many states have no income tax whatsoever.
There’s plenty of fat to cut, especially Medicaid, on which NY State spends far more than any other state in the union, or did as recently as 2005.
(Here is a fascinating NYT article on fraudulent billing in NY’s Medicaid program. AIDS drugs redirected to bodybuilders, a dentist billing 900+ procedures in a single day, a school official sending multiple thousands of students to “speech therapy” without evaluating any of them, again, in a single day. The article is 3 years old, but I suspect things haven’t improved too much. When government programs get this big, there are bound to be inefficiencies and fraud. I bet the story is similar in other states.)
[Thanks to Pawel Y. ($20) for his donation]