So you think the new Bush federal budget is a disaster? A closer look at the New York State budget proposed by Governor George Pataki indicates that another disaster is in the making and, as they say, the devil is in the details.
Grover Nordquist, one of the Bush administration's government-spending gurus, is famous for his mantra of "drown government spending in the bathtub." The formula to do this is a simple one: cut taxes dramatically --- especially for the rich, thus creating huge deficits --- and then use that as an excuse for slashing federal non-defense spending.
These radical spending cuts will siphon off funds earmarked for the states. The states in turn must repeat this process often using the same formula of regressive tax and spending policies. The final chapter in this sad story is to pass the growing bubble of under-funded but needed programs down to the local level. This process is in full swing right now in New York State. The outcome and the impact on those most vulnerable has yet to be determined.
There is a strongly held myth that New York State is a one of the highest taxing states in the country, way out of line with most other states. The obvious implication of this belief is that taxes and spending must be brought down, consistent with the Grover Nordquist mentality. A look at the facts will indicate that New York is not out of line, especially when compared to other states in the urban northeast. Data on state taxes per capita for the nine northeastern states indicates that New York is right in the middle of the pack. Looking nationally, in the states that have 80 percent of the national population --- large states with significant urban populations --- New York is again in the middle group.
New York and the other northeastern states have significantly better public schools than the low-tax states. A study released several years ago by a national accrediting agency ranked the 100 top public high schools in the US. New York had about a third of them and the rest of the northeastern states had a majority of the rest. It is true that less-populated southern, midwestern, and mountain states have lower taxes per capita. But they also have much lower per capita incomes and terrible public services and schools. These, of course, are the red states.
The recent history of tax changes in New York shows a drastic reduction in the top tax rates since 1994. These reductions parallel the federal cuts, and have dramatically reduced state taxes for the most affluent New Yorkers. The top rate is now about half of the amount in effect prior to 1994. For high-income New Yorkers, this has been a very significant reduction in state tax payments. The cumulative impact of these top-rate reductions has been to reduce annual tax revenue by $15 billion, almost four times the projected state budget deficit for the coming fiscal year.
New York's deficit is at $4.1 billion, and Governor Pataki's proposals to close this gap are now before the state legislature. And his budget-reduction proposals will impact the most vulnerable citizens in New York. The major proposals are summarized below:
Reduced Medicaid payments: $1.9 billion
Reduced mental health support: $.4 billion
Reduced tuition aid and SUNY cuts: $.3 billion
Reduced contributions to state pension funds: $.9 billion
Eliminate tax holiday on clothing: $.5 billion
All of these reductions will impact people who are hurting financially or are already at the bottom rung of the economic ladder. The Medicaid cuts will impact hospitals, nursing homes, and individuals in ways that may well eliminate needed medical care now but lead to much higher costs and suffering later.
Some obvious options for reducing Medicaid costs have not been addressed. Prescription drug costs are up 23 percent, yet no attempt is made to use purchasing power to get lower prices or develop a program to obtain drugs from Canada. Why aren't these options on the table? You must assume that federal mandates emanating from the Bush Administration are responsible.
Built into the budget already are significant increases in SUNY tuition and a reduction in the top income-tax rate. In every instance of budgeting priorities, the Pataki administration has a choice between meeting essential needs of New Yorkers or protecting the interests of the most affluent. Whenever that choice is available, the decision is always in favor of the affluent.
Wealthy New Yorkers can well afford to have a small increase in the top rate to make these draconian budget cuts unnecessary. The federal tax cuts already enacted, which are a major direct cause of the state's budget shortfalls, have provided these high income New Yorkers with a significant tax reduction. This should enable these taxpayers to redirect a small portion of their federal tax savings back into New York State to address this budgetary issue.
If the top tax rate was increased from 6.85 percent to 7.7 percent for taxpayers with taxable incomes of more than $150,000 per year, and to 8 percent for those with taxable income of more than $500,000 per year, the budget shortfall would be largely eliminated. For these high-income taxpayers, approximately one quarter of their federal tax reduction would be redirected to New York State.
For taxpayers below the $150,000 mark, no change would be needed. The added revenue would restore at least a level of fairness in addressing the desperate needs of the most vulnerable citizens of New York.
To argue that the affluent cannot afford this type of tax is ludicrous on its face. Other easily found budget options --- using purchasing power to lower drug costs and closing corporate tax loopholes --- could completely eliminate the budget deficit. Why aren't these options even under consideration by Governor Pataki?
Such proposals clearly conflict with the mentality of Grover Nordquist and the ideologues of the Bush Administration. They apparently expect the states to follow the dictum of every man (as well as woman and child) for himself and let the devil take the hindmost. Is this the kind of a country, or state, we want to live in?
The resolution of this question is being played out in New York, all the other states, and at the federal level. How it is resolved will tell a lot about us as a state and a nation. And the prospects are not encouraging.