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Manhattan Institute

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Spending We Don't Need


Spending We Don't Need

February 17, 2005

Politicians in New York and New Jersey are fond of telling us, everytime they raise our taxes (which is quite often these days), that they have no other choice, because in these tough times our needs are great and our revenues are scarce. A new study from the Federal Reserve Bank of Boston demonstrates just how much the pols have been buffaloing us with that claim.

The study, comparing a comprehensive array of data from all 50 states, shows that while New York and New Jersey tax their citizens at rates well beyond the norm, the two states have only average public-spending requirements, based on their citizens' needs.

At the heart of the study is a ranking of each of the 50 states' "fiscal needs." The authors analyzed and compared data on total population, plus the numbers of poor people, school-age kids, cars on the road, murders, etc.—all the factors that help drive government spending on basic services like education, public welfare, health care, highways and policing.

Listening to the constant drone for more spending and more programs from our political leaders, you would think that New York and New Jersey rank pretty high in terms of their needs. You'd be wrong.

New York state's fiscal requirements, the study found, are only slightly above the national average, ranking 101 on an index in which 100 is the national average. States like New Mexico, California and Texas, with their large and poor immigrant populations, rank far higher, as do states like Louisiana and Mississippi, riddled with intense rural poverty.

Jersey's fiscal demands, meanwhile, are even lighter than New York's and rank below those of 32 other states, including the likes of Minnesota and Kansas, based on demographic comparisons.

Now, turn from spending needs to taxes. The study found that New York's "tax effort"—the total of all its taxes and licensing fees per capita—ranks first among the states (second if you include the District of Columbia), more than 40 percent above the national average. Jersey isn't far behind, ranking sixth.

That both states score much higher on taxes than on fiscal needs suggests that each is already taking in more than enough revenues to deliver quality government services. Yet each time our local pols raise taxes or borrow more money, they tell us there is no less painful alternative.

In overriding Gov. Pataki's budget vetoes last year to produce a budget that included big tax increases, Assembly Speaker Sheldon Silver termed the governor's budget cuts "destructive." Jersey's former governor, James McGreevey, said the state's needs were so great that he had not only to raise taxes but also to borrow nearly $2 billion (illegally, it turned out) to plug his budget gap, in the process boosting state spending a stratospheric 17 percent.

Occasionally, politicians will tell us that all this extra taxing goes to produce better services and better outcomes than other states can boast. But there's little evidence that either New York or New Jersey residents are getting much extra benefit from all the cash they are forking over.

Much of New York state's spending is sucked up by its giant Medicaid monster, which expends money on a per capita basis at a far greater rate than other big states like Texas and California. But New York doesn't have a healthier population than these states, especially as measured by things like mortality rates among the poor.

Jersey, meanwhile, pours big chunks of its state spending into its public schools, ranking fifth among the states in spending per pupil and first in teachers' salaries. But Jersey's students place 10th nationwide on test scores and the state ranks dead last on the Manhattan Institute's School Efficiency Index, which ranks each state's public schools by student performance in relation to school spending.

It's no secret that taxes in both states are high. But for too long our political leaders argued that those taxes were necessary because the need is so great. Only the most gullible taxpayers would swallow that argument.

Steven Malanga is a contributing editor of the Manhattan Institute's City Journal. Adapted from