CWA 1180 - Political Action

Budget politics continue to ignore need for restoring revenue
May 2004

This year's city budget adoption process has received much less attention, both in the media and among various city communities, than last year's. Last year, the city faced a multi-billion dollar deficit, which the mayor and business groups wanted to close on the backs of working people. Local 1180 joined other labor and community groups in fighting back. The Budget for a Livable NYC Coalition was formed in the process, and Local 1180 has been an active member of the coalition from the beginning. In the end, fair budget proponents like the coalition scored some modest victories, mostly importantly the passage of a very small income tax surcharge on high-income earners. Given the fact that the budget crisis was fundamentally rooted in tax cut policies of the 1990s that overwhelmingly benefited corporate and wealthy taxpayers, this was a very reasonable move. There were other tax hikes, like the steep property tax increase, which hit working-class and middle-class new Yorkers. And there were deep spending cuts.

This year the improvements in the economy (which translate into greater revenues) and the effects of the tax increases have kept the city from facing a similar crisis. But the underlying problem—that tax cuts implemented in the 1990s undercut the city's ability to pay for needed services—remains and can only be addressed effectively through restoration of revenue sources. Local 1180 and The Budget for a Livable NYC Coalition are adamant that the rich are still not paying their fair share. The mayor, meanwhile, is moving to reverse the tax increases from 2003. The City Council is also trying to repeal some of the increases, though they are trying to do so in a way that specifically helps the hardest hit lower-income brackets that were effected. But neither end of City Hall is willing to talk about restoring the stock transfer tax or the commuter tax, and neither is willing to say that the temporary income tax surcharge oh the wealthy needs to be permanent.

The coalition last year researched and put together a detailed revenue proposal that shows that the city's budget can be put back on permanent, solid footing by closing business tax loopholes and asking wealthy New Yorkers to also contribute. The coalition's original statement, which lays out principles for a fair way to address the crisis, follows below. The coalition has updated their revenue proposal, which you can read by clicking here.

Gotham Gazette, an on-line city news clearninghouse, also has a good analysis of this year's budget process; click here for that.

Budget for a Livable NYC Coalition statement:

New York City's budget both shapes and reflects New Yorkers' collective priorities, values and visions for a livable city. The amount of revenues we raise and the ways we choose to spend them determine whether we have a city with solid public education, necessary social services, affordable housing and healthcare, low crime, well maintained parks and streets, and adequate fire and police protection. The City's current fiscal crisis threatens to devastate funding for vital services and return us to the chaos of the 1970s, when residents and business fled the city in droves. But it also offers us an unparalleled opportunity to develop a more inclusive and compassionate budget for New York City by expanding progressive and sustainable revenues and by opening the budget process to a robust, genuinely participatory public debate.

We believe that a budget for a livable New York City starts with these principles:

Further cuts to essential public services impair the city's long-term economic recovery and place our most vulnerable residents in unacceptable jeopardy.
The City's need for additional revenues is best met through modest tax increases (many of which merely restore former tax levels) targeted to the wealthiest individuals and businesses, which would broaden the tax base, increase long-term, recurring revenues, and make our tax structure fairer and more progressive.
Significant cost savings in the budget can be achieved in many city agencies through smart spending strategies that improve services, and the collection of outstanding taxes and fines.

If we are to seize the opportunity that our budget crisis presents, we must first acknowledge what created it. A decade of massive tax cuts by both the City ($3 billion annually) and State ($16 billion annually) not only deprived us of desperately needed public revenues and helped create the current budget deficits, but also significantly reduced the fairness of our tax structures, and helped produce the greatest income disparities in the country. The wealthiest individuals and businesses received the overwhelming majority of benefits from city and state tax cuts, while substantially reducing their contribution to public revenues. At the same time, middle class New Yorkers actually lost economic ground, and the poverty rate in NYC began to climb. And all this occurred during the greatest economic boom the City has seen in decades.

The national recession and the impact of 9/11, on top of an already shrunken tax base, resulted in the current budget crisis. The City's response to the crisis to date—a combination of massive borrowing, severe cuts to core public services, with far deeper cuts in the works, and a whopping 18.5% property tax rate hike—has again placed the heaviest burdens on low and middle-income New Yorkers, while insulating the wealthiest individuals and businesses from sharing the burden. This strategy poses a clear threat to our immediate economic recovery, long-term viability and the overall quality of life in the city.

To grow and stabilize the City's revenue base requires a hard look at who is and isn't paying their fair share. New York's biggest and wealthiest businesses can and should contribute more to the City's revenue. Although the share of revenue from NYC personal income tax doubled over the last 25 years, the share of business tax revenues has remained essentially flat. In 2002, business taxes constituted under 13% of City-generated revenues, compared to 38% for property taxes and 20% for personal income taxes. Over half of New York City's corporations pay a minimum tax of just $300 a year, while a family of four struggling to survive on an income of $30,000 pays nearly twice that amount in City personal income taxes.

Extensive research shows that a well functioning, safe city with reliable services and an educated workforce are critical factors for business location decisions, with taxes being simply one of many considerations. Indeed, Mayor Bloomberg has said, "Any business that chooses where to locate based on taxes will be out of business the next day." Fear of losing our competitive edge cannot be used as a rationale for failing to overhaul our outmoded, unfair business tax structures. Municipalities and states across the country, including New Jersey, our geographically closest major competitor, are revising corporate tax structures and looking to their business communities to contribute a larger share of revenues. New York City should do no less.

Recognizing that the City must balance its budget annually, we believe that the current short-term "gap-closing by any means possible" method is fundamentally flawed. We must grow our way out of this crisis in a way that is fair, forward-looking and minimizes negative impacts on core services and the city's most vulnerable residents and communities. Restoring lost revenue sources, repealing unimplemented tax cuts, and truly spreading tax burdens and service cuts to those best able to tolerate them are the fairest and best ways to do this.

Click here for a copy of the coalition's current revenue proposal.

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