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The Rift on City Taxes Is a Split With Suburbs’

October 31, 2002

By E. J. McMahon

Faced with a huge and seemingly ever-expanding city budget gap, Mayor Michael Bloomberg recently floated a pair of trial balloons — only to see both ideas promptly shot down by Gov. George E. Pataki.

Pataki said Bloomberg’s proposal to restore the commuter tax would discourage businesses and workers from returning to the city in the wake of the 9/11 attack. The governor also dismissed the idea of placing tolls on East River bridges, saying the city wouldn’t attract jobs "by raising the cost of getting people to come here."

Critics blasted Pataki's statements as campaign posturing, and city politicians seem to assume that Pataki will simply reverse himself after Tuesday’s election. They should think again — because the governor scored valid points on these issues.

Yes, the Legislature’s 1999 repeal of the commuter tax was a transparently cynical political ploy. But that won’t make a resurrected tax any less damaging to a weakened city economy. And while there’s a strong academic case to be made for tolling bridges, the financial impact on affected commuters clearly would be enormous.

The Pataki-Bloomberg split on revenues fueled speculation about a personal rift — but a far more troubling possibility is that their exchange signals the re-emergence of an age-old political divide between the city and its suburbs, which had greatly diminished during the eight-year tenure of Mayor Rudolph Giuliani.

With roots in both Brooklyn and Nassau County, Giuliani managed to boost the Big Apple without knocking the suburbs. And the sense of solidarity between New York and neighboring counties was never stronger than after the 9/11 attack, which killed at least as many suburbanites as city residents. But that solidarity is rapidly evaporating under the fiscal stresses created by the 2001 economic downturn, terrorism and the stock market implosion. These problems have been greatly compounded by the budgetary mismanagement of elected officials on both the state and local levels.

Most of the suburban commuters from whom Bloomberg and the City Council would like to extract roughly $500 million in added taxes next year already face tax hikes in their home counties. And if Pataki doesn't pull a U-turn back to the fiscal conservatism of his first term (assuming he wins), both suburban and city residents will be paying higher taxes and fees to close the state's huge budget gap.

Given their continuing dependence on Albany, the mayor and the City Council can’t afford to be oblivious to the legitimate concerns of suburban residents who work in New York. By the same token, the governor and suburban politicians need to recognize that if New York City’s economy is swamped by this latest fiscal crisis, the whole region could sink with it.

City officials’ obsession with restoring the commuter tax merely distracts attention from the core problem, which is their failure to come even close to bringing rising spending back into line with reduced revenues. Besides, the standard "fair share" argument in favor of this levy is simply bogus. Far from being a net drain on the city treasury, commuters are key cogs in a massive engine of wealth creation that City Hall already taxes to the hilt.

As for bridge tolling, the idea still has plenty of merit — but will get nowhere if it’s seen as a raw revenue grab. Tolling the bridges should only be proposed in the context of a comprehensive plan for improving both mass transit and highway transportation in and around the city.

Instead of resenting Pataki for his well-reasoned critique of new taxes and tolls, city officials should be looking for ways to join their suburban counterparts in pressing him for relief from costly state mandates.

The focus should be on big-ticket items starting with the grotesquely expensive Medicaid program, long a burden on taxpayers at both the state and local level. After virtually freezing Medicaid costs earlier in his tenure, Pataki has spent the past few years significantly expanding the program — and the bills are coming due at the worst possible time. Reversing course on Medicaid increases and enacting real cost-saving reforms would be a win-win-win proposition for the state, the city and the suburbs.

Tort reform is another idea with potentially strong municipal crossover appeal. Suburban officials have nothing to lose by backing Bloomberg’s effort to protect his budget from runaway jury awards in civil damage suits, which last year cost the city over half a billion dollars.

While their interests frequently diverge, there’s more than enough common ground for the state, city and suburban politicians to stand on together in the difficult months ahead ’ if they so choose.

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