Politics and Bad Math

New York metro area politicians and the local unions and lobbyists are bad at math.

Real bad.

The SEIU and GNYMA are running an ad campaign demanding that the state impose a fair tax on people making more than $250,000. They want to use the tax hikes on those people to close a $15 billion hole projected in the state budget.

What is left unsaid is that there's no way that the taxpayers making over $250,000 could close that budget on their own unless we're talking about confiscatory rates, and even then, it wouldn't happen. What's also ignored is that the reason that the state needs to raise taxes and fees is because it's those very people making over $250,000 and their related companies that are being hit hardest by the Wall Street meltdown and that they are not getting the bonuses or compensation packages they were getting just a few years ago. Without the bonuses and compensation, they're not spending throughout the region and the tax authorities aren't getting the revenues they've been using to balance the budgets for years. The shortfall has blown big holes in the budgets of New York City, New York State and surrounding communities.

The meltdown has meant that corporate taxes, including taxes on Wall Street transactions, are well off projections and it's torpedoed the budget in a big way.

These financial wizards feel that the solution is to tax people already heavily taxed in the name of "fairness." It's nothing of the sort. It's simply a class warfare demand to keep spending where it is without taking actions that are even remotely fiscally responsible. The state's budget already shows that there's no interest in fiscal responsibility since it's an increase over last year's budget despite the expected shortfall and the difference is made up with proposals for higher taxes and fees to bring in another $1 billion.

New York City has tacked on still more taxes to residents, including a 7% hike in property taxes, and the MTA is imposing fare hikes and service cuts that could range anywhere from 8% to 25% depending on whether the game of chicken being played in Albany results in additional funding for the MTA to offset the need to increase fares accordingly.

All that these taxes and fees are doing is making the region less competitive and sucking money out of taxpayer pockets at a time when they need it most. It's counterproductive and will result in a prolonged recession in the region - exacerbated by the fact that businesses will look elsewhere to start up or maintain their headquarters because it makes little financial sense to incur the high tax burdens just to claim a New York address.

Meanwhile, across the river, Democrat Jon Corzine is still floating the idea of allowing localities to shirk their pension payment obligations. Never mind that the state has underfunded the pensions for years, they're looking to accelerate that trend because no one wants to address the fact that the system is completely broken. Corzine would rather see the pensions go underfunded than see taxes raised (which they'll be raised anyways because localities can't control their spending any more than the state or federal governments). It's a destructive and short sighted policy prescription which is how states like New York and New Jersey got into the fiscal mess they're in. They took the easy way out to deal with their financial problems, ignored the warning signs, and continue to impose the highest tax burdens in the nation.

Taken together with the mess at the federal level and you have politicians across the aisle whose only exposure to math is what they see at the polls and knowing that they just have to win elections. They aren't willing to take on tough decisions that might result in better governance and fiscal policy.

UPDATE:
James Bradshaw emails to note that Assembly Republicans are hammering away at Paterson's proposed budget claiming that it would increase taxes and fees on the middle class by nearly $4,000 per year.

The average family of four in New York would have to dish out $3,875 a year in new taxes and fees if Gov. David Paterson's budget proposal is approved, a review Thursday by Assembly Republicans shows.

From $73 a year on deposits on water and juice bottles to a $720 increase in state college tuition and fees, the average family would be further pinched by the governor's proposal, said Assembly Minority Leader James Tedisco, R-Schenectady.

"All these tax-and-fee hikes are like declaring war on New York's middle-class families," Tedisco said.

Paterson has come under heavy criticism for proposing 137 new taxes and fees and revenue raisers to help close a $15.4 billion budget deficit in the 2009-10 fiscal year, which starts April 1.

The Democratic governor said Thursday that he tried to spread the pain as evenly as possible. He said Tedisco and other leaders have not offered alternatives.

"It is draconian," he said of the budget. "It is exactly what people describe it. But as governor, I had a constitutional purpose. I had to deliver a plan that reduces the budget deficit by April 1."

Paterson is right; the State GOP has to provide an alternative instead of simply noting the fact that the budget will hit up everyone in the state by thousands of dollars. I'd suggest starting with a zero-growth budget - the state budget should not be allowed to increase one dollar more than last year's budget. If the state is in as dire shape as everyone contends, start acting like it instead of claiming that you need more tax revenues to make the budget numbers work out - with an increase in state spending to $121 billion, which is $1.3 billion more than last year's budget.

The unions and health care groups are all proclaiming doom and gloom, despite the fact that they're going to see more money than last year; they're just not going to see as much as they had hoped under earlier rosy budget expectations.

The unions should be prepared for far more disappointment in the days ahead as the reality of the budget situation should bring everyone to the table to concede that taxing the state out of the mess isn't the way to revitalize the economy. All it does is increase state spendig - but then again, that's in the union's interests.

The state GOP needs to hammer this home and provide alternatives. And that's a lesson that must be learned across the nation if the GOP wants to see a resurgence at the state and federal levels. Fiscal irresponsibility got the nation into this mess - fiscal responsibility is the only way out.