2005-04-15 / Columnists

The Rockaway Irregular

The Problem With Taxes
by Stuart W. Mirsky


Close to four years ago, when Mayor Mike Bloomberg walked in the door at City Hall after having been elected mayor on a promise of lower taxes, he found a massive budget deficit staring him in the face. He had another problem, too. As a result of the city’s near bankruptcy back in the seventies, a State Financial Control Board had been established to monitor city finances. Should the city fail to balance its budget within a certain, relatively narrow, margin, this Board is mandated to take over day-to-day management of city operations. Had this occurred, Bloomberg would have been relegated to virtual figurehead status and become the first mayor in history to lose control of the city he’d been elected to govern. He would have visibly failed to do the job the citizens of New York had just elected him to do.

Faced with this prospect, the mayor had two choices: radically cut the costs of governing or raise our taxes. He opted for the latter. Indeed, the former would probably have been impossible to achieve in the short term and certainly would have added astronomically to the post 9/11 disruptions then afflicting our town. Thus, the mayor fought for and won increases in our property taxes (via the City Council) and certain other taxes, including the sales tax (via the State legislature). But, he assured us, these were to be temporary measures, tailored to meet a short term need. Once higher taxes had gotten us over the fiscal hump, the clear impression conveyed by the Mayor was that tax rates would come back down. After all, he was a Republican who had run on a commitment to preserve and extend the improvements wrought by his Republican predecessor. But something went awry in the promised scenario and the “temporary” aspect of his tax increases gradually faded from view.

Because of how the city budget is structured, there are sizeable cost centers over which the mayor has little or no control. Largest among these are programs like Medicaid, funded 50% by the federal government and 50% locally. New York State is one of the few states in the nation that splits the local share of costs with the counties under its jurisdiction. Where most states foot the local portion of the Medicaid bill entirely, our state government in Albany mandates that local counties, including New York City, pay half. Thus, New York City pays 25% of the massive, and growing, Medicaid costs in its district, costs which reflect levels of service deemed appropriate by state legislators but not fully paid for by them. Other areas over which the Mayor has little or no control include things like debt service, representing the costs to the city of borrowed money.

There are some budget items over which a mayor does have control. The number of employees in city agencies is one. Still, reducing the number of city workers is not an easy thing to do either. Most city workers are also voters . . . with friends and families who are voters. Since they’re also part of the city’s economy, there are added costs to large scale layoffs, as well. During the Giuliani years, headcount was controlled by imposition of strict limitations on hiring though a bit of legerdemain was also employed. The Giuliani administration moved some programs from city mayoral agencies, whose staff show up on city headcount rosters, to non-mayoral agencies whose staff don’t. In certain cases, whole staffs were transferred en masse to non-mayoral entities though the city continued to pay for them, sometimes at a higher cost.

So, managing the city budget and keeping costs down are not simple undertakings. Still, it can be done. City operations, like any entity’s operations, are prone to inefficiencies. Cleaning up and rationalizing systemic waste, operational sloppiness and redundancies, remains a viable option for any mayor who truly wants to bring costs down. These are not without some pain too, of course, and there will always be civic constituencies with a vested interest in the status quo. But any mayor who is serious about lowering taxes, and keeping them down, has to reduce the city’s costs of doing business somewhere.

About a year ago, Mayor Bloomberg told a tumultuous crowd at a Brooklyn political rally at the El Caribe that he planned to fight to ensure that “temporary” tax increases he had urged in his first year in office would “expire on time.” Although he made no mention of reducing city property taxes, he had, by then, also begun a process of sending residential property owners a $400 rebate on their tax payments, thus leaving the property tax increase he had fought for in place (with the option of ending rebates at any time) while enabling him to offer voters some of their own money back with his name on the check. But, he assured his listeners at the rally, he wasn’t about to let those legislators up in Albany, or anywhere else, extend tax increases one moment longer than the date they were scheduled to expire.

Unfortunately, the Mayor never made the effort to reduce headcounts or to home in on reducing operational waste and inefficiency. But new costs continued to pop up including, the MTA’s recently announced shortfalls. Not even a major sale of MTA-owned land in a contested Manhattan deal for a stadium on the West Side promises to close this gap, even as the city’s transit system has begun to experience 1970’s style deja vu disruptions due to breakdowns, service delays and track fires. MTA personnel, of course, are outside the mayoral agency system and so have more freedom in hiring and setting salaries than do their mayoral agency counterparts. Indeed, the MTA’s salary structures are significantly higher than what’s paid for comparable positions in most of the mayoral agencies. Yet, despite higher pay and greater hiring freedom, MTA management has proven remarkably incapable of operating within budget and without ever growing infrastructural deterioration.

Like other quasi-governmental agencies in our state, the MTA is funded in large part by our tax dollars, including a substantial city contribution. So after raising fares and tolls as much as they think they can get away with in this cycle, and still realizing they are spending more than they’re taking in, what’s left to do? Taxes, of course. The state legislature, led by Democratic Assembly Leader Sheldon Silver and Republican State Senatorial leader Joseph Bruno, recently moved to extend the “temporary” sales tax increase Mayor Bloomberg promised to fight to keep temporary, in an effort to shore up the MTA’s ever-listing finances. So where’s the Mayor on this? Silent as a church mouse.

Recently, a colleague in these pages penned a piece telling us there was no problem with the Social Security system that a little more taxation couldn’t fix. Like our mayor and the bulk of our state and city legislators, he sees no problem with throwing a few more taxes into the mix.

But higher taxes impose a cost on those who pay them, as well as on the economic system that sustains us, while bureaucrats and government officials always want more — more staff reporting to them, higher salaries and broader mandates. Yesterday’s temporary tax increases become tomorrow’s baseline because taxation itself is addictive, draining the lifeblood from the economies it feeds on. That’s what it did in this city back in the ‘stagflation seventies.’ But Mayor Bloomberg seems to have forgotten the lessons of those years. Or, perhaps, having ascended to billionaire status in the private sector, he never quite learned to apply them in the public sphere? rockirreg@ aol. com.

 

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