For all the hue and cry about the ‘cuts’ needed to close New York City’s $4.9 billion budget gap, a funny thing happened on the way to the 2003 fiscal year: the first adopted budget of the Bloomberg era does not reduce overall city spending. The nearly $800 million increase in the "city funds" portion of the budget is the key to understanding why New York City continues to face massive potential deficits for as far as the eye can see.
Mayor Bloomberg's proposal to raise the city’s cigarette tax to $1.50 from 8 cents per pack is expected to cut taxable consumption in half, as many more smokers quit, cut back, or turn to alternative sources out of state or on the Internet. This would undermine the financing for Governor Pataki’s health care programs, which depend partly on revenue from the state’s cigarette tax.
Mayor Bloomberg could realize more than $1.2 billion a year in city budget savings if he can get municipal employee unions to agree to proposed labor givebacks and productivity reforms including a health insurance co-pay, a longer work day for teachers, more scheduling flexibility for cops and firefighters, and less vacation and leave time for newly hired workers. But it all starts with ‘the zero option’—a pay freeze after current contracts expire in fiscal year 2003.
A majority of City Council members has called on the council leadership to back a city income tax surcharge of up to 55 percent on high-income New Yorkers. This $1.23 billion tax increase would have a devastating impact on the city's economy, leading to the loss of another 48,000 jobs, according to the Manhattan Institute’s tax policy analysis model. It would boost the combined state and city income tax rate to a maximum of 12.5 percent—nearly double the next-highest rate in any neighboring state.
At a time when New York desperately needs to find ways of delivering public services more efficiently, its transit bus operations could prove to be a significant source of recurring savings for the future.
The key to unlocking these savings is competition—an essential spur to improved performance and efficiency that’s been missing from transit in New York for most of the past 50 years.
As another budget cycle begins, Governor Pataki is once again citing his record of spending restraint. Adjusted for inflation, however, the rate of state spending growth actually has been higher in Governor Pataki's first two terms than it was in Mario Cuomo's last two terms.
In the wake of the attack on the World Trade Center, New York City faces a budget gap of at least $3.6 billion. As a result, Michael Bloomberg will confront the city’s most serious financial crisis in a decade.
In the last five years, New York City’s economy has boomed and private sector employment has hit record levels. What, if anything, did lower taxes have to do with these achievements? And what are the implications for future tax policy?
The new federal tax law is good news for New York, which bears a disproportionately heavy share of the federal tax burden. But while it rests on a solid foundation of broad-based tax relief very similar to what President George W. Bush proposed, the tax cut bill enacted by Congress left a tangle of loose ends.