Remember the part about how the fiscal stimulus bill was going to provide relief to strapped states so they wouldn’t be forced to cut services and above all else raise taxes because, after all, raising taxes is something only Hoover reincarnations do in a recession. Well, meet a bunch of state Hoovers.
The WSJ on Saturday took on the subject by focusing on the plans of the Empire State:
In New York, Assembly Speaker (and de facto Governor) Sheldon Silver and other Democrats will impose a two percentage point “millionaire tax” on New Yorkers who earn more than $200,000 a year ($300,000 for couples). This will lift the top state tax rate to 8.97% and the New York City rate to 12.62%. Since capital gains and dividends are taxed as ordinary income, New York will impose the nation’s highest taxes on investment income — at a time when Wall Street is in jeopardy of losing its status as the world’s financial capital.
I know, you’re sitting there saying, so what, you nip a few millionaires in the butt, they can afford it. Well it goes a little deeper than that.
Oh, and it isn’t just high earners who get smacked. The new budget raises another $2 billion or so on top of the $4 billion in income taxes with some 100 new taxes, fees, fines, surcharges and penalties to be paid by all New York residents. There are new charges for cell phone usage, fishing permits, health insurance (the “sick tax”), electric bills, and on bottled water, cigars, beer and wine. A New York Post analysis found that a typical family of four with an income below $100,000 would pay more than $800 a year in higher taxes and fees.
In the meantime, the public employees unions get a 3% pay raise and the overall budget gets increased 9%. I know that we don’t want to cut services but do we really need the states to be expanding their budgets via Washington financing.
New York isn’t alone in pursuing this folly. Ten other states are considering tax increases and around the country municipalities of all sizes are coming up with ever more creative fees and charges. The new ethic is that if it’s something the citizens need charge them for it and if they already pay for it charge them more.
The reality is that states and municipalities do need to increase taxes at some point as well as cut expenditures.
Now is not the time to do either in a massive way and that’s why the federal government stepped in. But the assistance from the feds just plugs a hole, it isn’t going to solve the long-term problems.
New York’s folly is its failure to recognize that a new day may indeed be dawning. There isn’t an infinite river of revenue that will continue to flow to the state and expenditures need to be brought into line with that reality, not expanded. The federal trough will not be perpetually open to New York or any other state. In case the state hasn’t noticed, they’re quickly running out of money as well.
An interesting thing is about to happen. Politicians are actually going to have to become leaders as they’re forced to deal with some very harsh realities. It’s going to occur at the state and municipal levels first since they don’t have the luxury of printing their own currency. The political class is going to have to explain to their constituents that resources are in fact limited and future benefits will of necessity be limited. Good luck.
Posted in 
Tags: 
