Daniel L. Feldman

New York’s New Late Budget

In New York State Government, New York State Politics on August 5, 2010 at 9:30 pm

In a few weeks, Tales from the Sausage Factory will hit the bookstores. Its subtitle explains its scope: Making Laws in New York State. But making laws in New York State involves more than just the Legislature and the Governor.

The political environment that shapes those laws integrates vertically, up to Congress in Washington and down to City Hall in Manhattan and to city halls and county seats throughout the State; and horizontally, to courts, interest groups, media, civic groups, and especially to political movements and organizations.

So the book, and the continuing tales from the sausage factory to be found here, covers a wide territory.

Sometime last spring the publisher told us to stop writing, so it could actually publish the book.  That was tough, because the New York State Legislature kept giving us good fodder for comment. Here, though, we can pick up where we left off.

Let’s start with some recent news: the Legislature completed the budget earlier this week. Not the tardiest budget in history – that was August 11, 2004 – but close.

One of the issues that held up passage was the fight to “empower” SUNY and CUNY colleges to set their own tuition rates and in other ways have more autonomy. Some upstate legislators, especially Senator Bill Stachowski from Buffalo, hoped this would strengthen their local public college campuses as economic engines for their communities. Most downstate legislators feared that it could put tuition out of reach for financially strapped students. Ultimately, Stachowski and his allies had to settle for the equivalent of a study commission.

Another hang-up was the effort to tax hedge fund managers more heavily.

These managers, some of the highest-income people in the world, pay capital gains tax, at only 15 percent, on most of their income, not the 28 percent or 33 percent that most people have to pay, based on the income tax schedule. The Working Families Party is to the Democratic Party in New York something like what the Conservative Party is to the Republican Party. Working Families, reflecting outrage over this fact, argued that New York State should solve its budget problems in large part by taxing these extremely wealthy people more heavily.

But Mayor Bloomberg and the legislative leadership defeated the effort, pointing out that if New York did this, the hedge funds – which still contribute a very hefty sum to New York’s tax revenues – could escape by moving out. Connecticut Governor Jodi Rell helped by asking a few such hedge fund honchos to lunch, over which she very publicly asked them to move to her State.

Of course, if there were a national tax, the hedge fund managers could not simply escape a heavier tax burden by moving to a different state. A few years ago Senator Charles Schumer was among the leaders of the opposition to the effort in Washington to raise the national tax rate paid by hedge fund managers.

So the hedge fund managers escaped the tax, and the new New York State budget has its new taxes on the common folk, as well as the usual structural weaknesses, and the likelihood of real holes leaving us vulnerable to further “adjustments” later in the year and bigger problems next year.

More later on why we are so vulnerable to the hedge fund managers and others of their ilk.


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