CWA 1180 - Political Action

Tax deal on high earners averts "doomsday budget"
But budget battle not over yet
May 2003

On Friday, May 2, state legislative leaders and Mayor Bloomberg announcement an agreement that would avert the catastrophic "doomsday budget" that Bloomberg had announced on April 15 he would implement if help from Albany failed to materialize. Specifically, the deal calls for an increase in the city's personal income tax on earners of $100,000 or more, as well as an increase in the city's sales tax. Together these measures would add $2.7 billion in revenue towards the $3.8 billion budget gap.

For Local 1180 members, other municipal workers and working people throughout the city, this tax agreement is largely good news. The tax increase on upper-income New Yorkers finally makes good on the oft-repeated claim that everyone in the city must "share the pain" of the budget crisis. Until this agreement, the call for shared sacrifice had been no more than rhetoric, as the mayor looked only to squeeze concessions out of city workers, lay off thousands, and increase taxes that disproportionately hurt the working class (for instance, the property tax hike, which is passed on to renters, or the cigarette tax hike, or fee increases for recreational facilities). Specifically, the deal reached on Friday would increase the city's top tax bracket from 3.648% to 4.25% on single earners over $100,000 and married couples over $150,000. Those making $500,000 or more would see their tax rate increase from 3.648% to 4.45%. The increases are being called a "surcharge" and are to be phased out again after three years.

Unlike the income tax increase, which asks those who have more to contribute more, the hike in the city's sales tax is regressive and would be felt most by the poorest members of the community. The sales tax would increase by 0.125%. While applauding the income tax adjustment, labor leaders denounced the sales tax hike.

Both tax increases need legislative approval in Albany, which is why the deal with Assembly Speaker Sheldon Silver and Senate Majority Leader Joseph Bruno was significant. With their backing, the increases will pass the legislature. It is unclear whether Governor George Pataki will veto the increases, but legislative leaders believe they have enough votes to override a veto. (Pataki has vowed to veto similar measures that increase the state income and sales taxes. The state legislature has defied the governor's irresponsible opposition to any progressive tax increases and passed budget bills that close the state's own $11 billion gap partially through new revenue.) [UPDATE: Pataki indeed vetoed the NYC aid measure, and both houses of the legislature overrode his veto.]

The new revenues for the city are not the ones that Mayor Bloomberg had sought, but he became a partner in this deal and said, "It is painful, but it is the right thing to do." That move won him applause from municipal labor leaders who have pointed out that the rich need to do their share to help solve the budget crisis. "The personal income tax increase on the wealthy is clearly a victory for New York's working families," said Local 1180 President Arthur Cheliotes in a statement released on Friday.

Local 1180 members have waged a highly visible campaign for increased revenues from the rich. The union held a rowdy tax day demonstration on April 15, and aired two commercials on cable television last month.

The $2.7 billion deal means that the worst cuts in city services and the threatened additional 10,000 layoffs will not be implemented. It averts cuts in services that would have devastated the city. However, the budget battle is far from over. There remains a $1.1 billion hole in the city's budget and the struggle to bridge that remaining gap fairly continues.

Local 1180 and others would like to see that gap addressed through additional targeted revenue increases; specifically, a stock transfer tax. A penny-a-share tax on stock transactions would more than close the remaining city budget gap. The concept is similar to a sales tax, and since political leaders just increased the sales tax for everything else, why should the elite that buy and sell stocks be exempt from contributing?

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