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New York Post

 

Mike's Achilles' Heel

June 04, 2009

By Nicole Gelinas

HOW THOMPSON COULD POUNCE

CITY Comptroller (and may oral candidate) William Thompson released a report Monday that he could use to mount a case against Mayor Bloomberg’s fiscal stewardship.

Calling the city’s fiscal outlook “extremely sobering,” Thompson’s report describes Bloomberg’s deficit-closing program for fiscal year 2010 as "risk-laden."

Bloomberg is having none of it, of course. On Monday, he heralded a nearly billion-dollar sales-tax hike approved by the City Council as helping “ensure that we can balance the budget” -- although he still needs Albany’s approval for the massive hike.

Thompson could use his report’s numbers to challenge the idea that the city’s budget crisis was inevitable.

The city could not have prevented Wall Street’s meltdown, true. But the mayor could have better insulated the budget -- which relies to an unhealthy extent on personal-income and business taxes from Wall Street -- from the financial sector’s volatility during the good times.

The city gets nearly a third of its tax revenues from personal-income and business-related taxes that are sensitive to Wall Street swings. These taxes have fallen 17 percent and 7 percent, respectively, in the last year -- and the city anticipates further drops of 20 percent and 21 percent over the next year.

Half of the city’s projected revenue dip since January owes to a fall in collection of these taxes. After 2010, the city predicts double-digit growth in these areas. If that doesn’t happen, we’re in more trouble.

A few years ago, the city -- because of the Wall Street boom -- had unexpected surpluses nearly as big as today’s unexpected deficits. But such boom-and-bust cycles are a double-edged sword. With so much city revenue tied to such a volatile industry, budget planning -- and not just the market -- is a bear.

For Fiscal Year 2011 (13 months away), the deficit may clock in anywhere from $4.6 billion to $6.7 billion, Thompson’s report says, while the 2012 gap could be between $5.2 billion and $7.5 billion and 2013’s estimated deficit is $5.4 billion to $8.3 billion.

Bloomberg did put aside billions in the good times for future health-care costs -- money he is spending down now. But that didn’t fix the budget’s structural problem.

If Bloomberg really wanted to put the city budget on a sounder footing, he should have worked with Albany to cut top personal- and business-income tax rates.

Such cuts would have lessened the city’s dependence on these revenue sources -- making surpluses smaller in the good times and deficits smaller now. Lower taxes on businesses and entrepreneurs would have attracted nonfinancial businesses to the city, further lessening our dependence on Wall Street.

Bloomberg and the council moved Monday to eliminate a redundant business tax. But the modest easing here is still dwarfed by the general income-tax burden.

So far, however, Thompson has passed on this opportunity to criticize this aspect of Bloomberg’s fiscal stewardship. Instead, Thompson wants to raise taxes on those earning more than $500,000 a year, arguing that Bloomberg and the council’s sales-tax hike is too broadbased and regressive.

Campaigning last weekend, Thompson railed against Bloomberg, saying it is “time that we had a mayor . . . who will stand up and fight for us, who understands it isn’t about the rich.”

But New York’s problems stem from the fact that Bloomberg did the opposite.

Through tax policy, he steadily took money from rich people and companies and transferred it to poorer people, by pushing through hikes in funding for public schools. Since Bloomberg took office, city spending on schools (the part that comes from our taxes, not from federal or state subsidies) has nearly doubled, to $11 billion.

Now, many New York taxpayers -- people and companies -- aren’t quite as rich, and they may not regain that wealth anytime soon.

Original Source: http://www.nypost.com/seven/06042009/postopinion/opedcolumnists/mikes_achilles_heel_172450.htm

 

 
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