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PRESS RELEASE
November 1, 2005

Contact: Clarice Smith, Press Officer
csmith@manhattan-institute.org, (646) 839-3342

Two New Reports Detail Mayor Bloomberg’s Tax and Spending Policies; Offer Suggestions

NEW YORK –The next mayor, Mr. Bloomberg or Mr. Ferrer, ought to seek innovative ways to pare down growing City spending and not price New York City out of the reach of average wage-earning New Yorkers by increasing taxes and fees, according to two new Civic Reports on Mayor Bloomberg’s fiscal policy released on Tuesday, November 1, 2005 by the Manhattan Institute.

New York City, once described as ungovernable, overcame that stigma through innovative leadership. Now, New York City’s budget can be described as unmanageable, however, according to the reports, bold policies, and entrepreneurial management can reverse the claim.

“Mayor Bloomberg and The Limits of Pragmatism” Civic Report 46,  by Manhattan Institute Senior Fellow Nicole Gelinas, investigates the Mayor’s approach to the city budget and concludes that the mayor’s strategy of managing the “status-quo” is not  sufficient to shepherd New York City’s economy.

This report asserts that so called uncontrollable costs, pension and benefits for city workers, Medicaid for low-income New Yorkers, and debt service on capital spending, are uncontrollable only because the city has chosen not to control them. The report continues that these growing costs are controllable, but they require re-thinking the size, scope, and functions of New York’s government: in a word, innovation not pragmatism.

The report offers wide-ranging recommendations on how to control the aforementioned “uncontrollable” costs through innovative government policies.

“Pricing the Luxury Product,” Civic Report 47, an analysis on Mayor Bloomberg’s tax policy by Manhattan Institute Senior Fellow for Tax and Budgetary Studies, E.J. McMahon, delves into the Mayor’s tax record over the past four years. The report discusses how treating New York City as a “luxury product” has a net negative result for New York taxpayers and casts a cloud over New York’s future growth prospects.

The report notes that when Mayor Bloomberg took office in 2001 and faced enormous budget gaps, he resorted to a series of significant tax increases that represented a 180-degree turn from the tax-cutting policies of his predecessor. Although those increases were offset by federal tax cuts enacted by President Bush, the overall city tax burden climbed back to early 1990s levels. New York’s taxes far exceed the norm for other major cities and surrounding jurisdictions, the report shows.

Future increases in City taxes plus no probable further reduction in federal income taxes equals a poor fiscal outlook and heavy tax burden for New York City residents.

“Recurring expenditures exceed recurring revenues by over $3 billion, according to the mayor’s most recent estimate of the municipal government’s ‘structural’ budget deficit,” notes the report. “Attempting to close this gap with new permanent tax hikes would require raising the tax burden a step closer to the economically hyper-destructive levels of the 1970’s.”

Both reports conclude that it is imperative for the next mayor to find innovative solutions to the complexities and difficulties of budgeting in New York City. Relying only on raising taxes is not an acceptable measure, and neither is letting the “uncontrollable” costs remain uncontrolled.

“Mayor Bloomberg and The Limits of Pragmatism,” Civic Report 46, by Senior Fellow Nicole Gelinas is available at, http://www.manhattan-institute.org/html/cr_46.htm

“Pricing the Luxury Product,” Civic Report 47, by Senior Fellow for Tax and Budgetary Studies E.J. McMahon is available at, http://www.manhattan-institute.org/html/cr_47.htm

The Center for Civic Innovation (CCI) is a program of the Manhattan Institute. The mission of the Center for Civic Innovation is to improve the quality of life in cities shaping public policy and enriching public discourse of public issues.

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