The Bush Fiscal Crisis: NEW YORK

 

New Yorkís budget deficit in 2003 was among the worst in the nation, and closing the gap resulted in unprecedented political battles in Albany to resolve it.In the end, the negative effects on state revenue of Bushís tax cut plan together with the failure of the Federal government to make good on its promises of aid in response to 9/11[1] or to provide aid in response to the economic recession resulted in increases in state taxes and fees affecting every New Yorker.†† According to the Center on Budget and Policy Priorities, the Bush Administration's "framework for fiscal recovery" includes business tax provisions that reduce state revenue nationwide by about $5 billion per year.[2]††

 

The benefits from the 2003 Bush tax cuts to the typical New York resident are less than the cost of four pairs of new shoes for your kids if you are a typical family.The effect of the May 28 Bush tax plan on NY's poorest 60% of taxpayers will be a tax reduction of less than$430in 2003while the richest 1% of New Yorker taxpayers will see their taxes drop by more than $81,308.[3] For a New Yorker in the middle 20% of the income distribution, the combined 2001-2003 tax cuts reduced his or her tax bill by an average of $793 in 2003. However, the non-partisan group Citizens for Tax Justice calculates that the public debt burden for that same person increased by $3,758.

 

Partly in response, NY enacted broad-based tax and fee increases that more than offset the cuts in federal taxes for the vast majority of New Yorkers.†† Given Governor Patakiís pledge not to increase taxes, this will mean more attempts to enact cuts in2003/2004.[4]

 

Examples of some of the tax and fee increases include:

 

v     The state sales tax, which falls disproportionately on lower income families who spend most or all of their income, was increased by .25%, and by an additional .125% in New York City.

v     The permanent exemption on sales tax on clothing and footwear was eliminated and replaced by a two-week tax holiday for these items.

v     Fees were increased on numerous items including tires ($2.50.tire), motor vehicle fees (driverís license renewal increased to $35; vehicle sale fee increased from 1 to $5; title fee from $5 to $10; license plate fee from $6 to $15; vehicle insurance fee from $1 to $5), hospital revenues (.7% assessment on gross revenue), home care service revenues (.6% on gross revenues), real estate transactions (property transfer fee increased from $25 to $50; fee for broker/dealer statements from $20-800 to $30-1,200), and many others.[5]

v     New York City was forced to implement an 18.5% increase in property taxes, while 52 of 57 counties raised taxes an average 12.5% partly in response to increased Medicaid payments[6]In NYC this meant that the median property tax payment of 4,163 increased by more than $770, while in Syracuse, an increase of 12.5% would mean that the median property tax increase would be almost $300.[7]

v     There was a 7.5% cut in state funding to local social services administration.

v     In K-12 education, the NY Education Dept. reports an average 7% increase in school taxes in NY counties.[8]Even with these increases, teachers are being laid off in many districts while class sizes continue to increase.

v     In higher education, "New York is one of the 16 states with greater than 10% tuition increases according to the National Association of State Universities and Land Grant Colleges."[9] with SUNY/CUNY tuition rising by $950.

v     The conservative NY Fiscal Watch estimated that the tax increases in NYC would result in job losses of more than 18,000 in the private sector.

 

 



[3] Taken from figures from Citizens for Tax Justice - Figures for lowest 60% calculated as average of the tax cuts for each of the lowest three quintiles (Average of $72, $421 and $723 = $429)

[4]Given the Legislatureís successful overriding of Patakiís 119 budget vetoes for the current year, and the consequent conversion of many proposed cuts into tax increases, it is uncertain what the outcome will be next year, though it is likely to once again include battles over the balance between service cuts and tax increases.

[5] See http://www.osc.state.ny.us/reports/budget/2003/enactedbudgetreport.pdf where the appendices detail a 6 page list of new and increased fees and assessments.

[7] See http://albany.bizjournals.com/albany/stories/2003/08/04/story4.htmlfor median home values in Syracuse and NYC.