Once a Tax, Always a Tax (especially on the wealthy)
In a surprise move this week, the NY state legislature is contemplating making permanent a “temporary” tax on the wealthiest New Yorkers. (more…)
New Yorkers Fleeing in Droves
CNSnews reported this week that a study by the Tax Foundation found a net loss of 1.3 million New Yorkers who left the state over the 10 year period from 2000-2010.
3.4 million total moved out of state, but another 2.1 moved in, so the change was -1.3 million — which totaled a loss of $45.6 billion in income.
Although many factors determine one’s decision to move to or from a locality, taxes are typically part of the process. As such, the Tax Foundation noted many high tax facts that are unique to New York:
According to the group, New York ranked second among the states for the highest state and local tax burden in 2009. The Empire State was ranked highest for tax burden every year from 1977 until 2006, except in 1984 when it was ranked second.
New York State has a progressive personal income tax rate ranging from 6.45 percent to 8.82 percent for those earning over $2 million. Sales varies by county, and is between seven and eight percent. In Manhattan, the sales tax is 8.875 percent.
According to the Retirement Living Center, which examines tax burdens by state for those nearing retirement, New York also levies a gasoline tax at 49.0 cents per gallon and a cigarette tax of $4.35 per pack, along with an additional $1.50 per pack in New York City.
New York is also one of 17 states plus the District of Columbia that collects an estate tax, with a $1 million exemption and a progressive rate from 0.8 percent to 16 percent.
In 2007, New York State collected $1.1 billion from its estate and gift taxes, the highest of any of the states, according to the Tax Foundation.
I have mentioned these points before. Back in 2009, Rush Limbaugh fled the state due to the crushing taxes. And an Op-Ed in the NY Post last year discussed the implications of a shrinking population — loss of revenue, House of Representative seats, and policy power.
High taxes have devastating consequences. Thomas Sowell once quipped, “Elections should be held on April 16th- the day after we pay our income taxes. That is one of the few things that might discourage politicians from being big spenders”.
Striking Workers, Striking Policy
It may not be well known, but in New York, strikers – like the Verizon ones – are able to collect unemployment insurance while striking.It’s about time we expose the audacity of union employees collecting benefits during their time of voluntary unemployment. It is unconscionable that pro-union policies allow their members to deplete the state unemployment coffers into which hard working employers contribute for their employees. The present job environment is quite disparaging. With 9.2% unemployment and people desperate for work, unemployment insurance funds are already running at empty. That workers with jobs (like Verizon) are exhausting it further by claiming funds when they have elected to not work is despicable. Viewing this practice in tough economic times like these lets one see how truly outrageous it is. This policy must be reversed.
NY Pension System Problems
The New York pension system is out of control. In addition to the extravagant, irresponsible and under-reported negotiated levels of benefits, there is an additional characteristic of the system that is never talked about. There is a huge break that goes to New York retirees; anyone who gets a retirement pension from New York State, or any locality or agency (teacher, firefighter, etc) pays no city or state income tax on that pension money. This hearkens back to the days when New York workers were so underpaid that this benefit was warranted.
It should be noted that nearly a decade ago, that provision of New York state law was declared federally unconstitutional. It was determined that New York state could not exclude federal retirees from the tax exemption The courts gave New York two options: make New York government pensions taxable, or add federal workers to the list of non-taxable agencies. Of course, New York chose the latter, thereby adding to the state budget deficits.
Even though historically, public sector employees earned less than what those skills would command in the private sector, that is clearly not the case today. Study after study has shown that public sector compensation – which includes retirement pensions – has steadily outpaced its private sector counterparts in recent years. New York is among the worst offenders.
This state of affairs must be reversed. Allowing the exempted retiree pensions to be taxed the same way other retiree pensions would accomplish two goals: 1) lessen the compensation disparity with private sector employees, and 2) severely reduce the New York budget deficit by providing additional revenue to the state.
Crains: Wall Street Bank Bailout
How come this bank gets propped up, but others don’t? Crain’s New York has the news here:
Wall Street bails out Carver Federal with fat check
The Harlem bank raises $55 million from an investment group that includes titans Goldman Sachs Group Inc and Morgan Stanley; feds had ordered the cash infusion to save the institution.
Carver Federal Savings, the nation’s largest bank founded and run by African-Americans, has staved off possible collapse by raising $55 million in fresh capital.
The investors include Goldman Sachs Group Inc. and Morgan Stanley, which have agreed to invest $15 million each, while Citigroup Inc. and Prudential Financial have agreed to put in $10 million, according to an announcement from Carver’s parent, Carver Bancorp. American Express and three other firms are investing smaller amounts. Chief Executive Deborah Wright, who has led the bank since 1999, will remain at her post.
“I haven’t had a day this good in some time,” said a relieved Ms. Wright, who added she was “terribly grateful” for the financial community’s vote of confidence in her bank. “We have a lot of hard work ahead.”
The Harlem-based bank was ordered by federal regulators earlier this year to raise additional cash as it staggered under a hefty load of delinquent real estate loans. Under Ms. Wright’s leadership, the bank had moved from its traditional business of lending to one- to- four-family homes and into larger commercial real estate projects. That strategy backfired when the real estate market hit the skids and mortgages for low-income borrowers dried up.
Earlier this year, 12.3% of the bank’s loan portfolio was more than 90 days delinquent. The industry average is 4.9%, according to Federal Deposit Insurance Corp. data. In addition, although $74 million of its loans were well overdue, Carver had just $21 million in reserves to cover loan losses.
In February, the U.S. Office of Thrift Supervision ordered Carver to raise additional capital by the end of April or face being seized and sold to another institution—or simply dissolved. The amount Carver raised exceeds the amount demanded by regulators, Ms. Wright said.
Last month, the bank named a new chief financial officer—its fourth in the past three years—and said it hired an recruiter to find a new president and chief operating officer who would oversee lending, retail, marketing and human resources. Ms. Wright said the new executive would allow her to devote the bulk of her time to drumming up new business, adding that Carver will soon step up its marketing.
The Harlem business community galvanized to help rescue Carver, a fixture of the city since 1948. Lloyd Williams, CEO of the Greater Harlem Chamber of Commerce, said a private breakfast was held in late April at Sylvia’s Restaurant in which Ms. Wright and senior Carver officials met with former state Comptroller Carl McCall, former city Comptroller Bill Thompson, U.S. Rep. Charles Rangel and other Harlem business and political leaders to discuss ways to turn around Carver.
“It is exciting, and the community is now stepping up to the plate,” Mr. Williams said shortly after that meeting, “because they have been asked to do so in a meaningful manner.”
Teachers Unions and School Closings
Catching up on articles over at the WSJ, I came across this gem last month from Barbara Martinez. It describes how the teachers unions in NY are suing again to stop the closure of failing schools. This article illustrates the power of the teachers unions and the powerlessness of the taxpayers, who continue to subsidize failure and are asked to continue to shoulder the burden of educational costs. The article is reposted below.
TEACHERS UNIONS SUE TO BLOCK SCHOOL CLOSURES
The fate of tens of thousands of students was thrown into question Wednesday after the United Federation of Teachers and the NAACP sued to block the city’s plans to shut down 22 failing schools, a move that threatened to derail a major Bloomberg education initiative for a second year in a row.
The lawsuit echoes another the UFT filed last year that successfully halted the administration’s plans to close 19 schools. Two courts sided with the UFT last year. The lawsuit goes to the heart of a national philosophical divide about failing schools. In general, teachers unions believe that districts have an obligation to fix schools, while others, like Mayor Michael Bloomberg, hold that some schools are so troubled that the only choice is to shut them down and replace them with potentially better schools.
At a press conference, schools Chancellor Dennis Walcott blasted the lawsuit as “outrageous” and said the action will “hold hostage” thousands of students who are set to attend certain schools.
“Students now have to wait and wonder” whether they can attend the school they chose or were assigned to, Mr. Walcott said. “It’s unacceptable, and we’re not going to tolerate that. We’re going to fight. Right now the UFT and the NAACP are denying our students quality options.”
About 70,000 students have already been matched to city high schools, and thousands more have gone through the charter lottery process to determine their schools.
Hours earlier, Michael Mulgrew, the UFT’s president, said at a press conference that the DOE “has not learned its lesson.” He said the lawsuit is based on the DOE’s failure to satisfy an agreement it reached with the UFT to support failing schools before deciding to close them. The suit also charges that charter schools are getting better access to facilities than the traditional schools in the same buildings, which would be contrary to state law that mandates equal treatment among schools.
Those on the side of the teachers union, which includes a number of City Council members who attended the UFT press conference, community advocates and parents, said the city’s process of phasing out schools one grade at a time is disruptive to the students that are left behind. In addition, the lawsuit charges that charter schools that are placed in traditional school buildings get better access to amenities such as libraries, cafeterias and gyms.
Mr. Mulgrew said that after losing the legal fight to close schools last year, the DOE agreed to support the failing schools with more staff and other assistance, but he said that never materialized.
The DOE “is depriving students of tools and resources to achieve academically,” said Ken Cohen, regional director of the New York State Conference of the NAACP. Mr. Cohen said that at Jamaica High School, for instance, the new schools have smart boards while the students at the school being phased out have “broken blackboards.”
Mr. Walcott rejected all of the lawsuit’s allegations, saying the motivation was to protect jobs, not students. He said he was particularly disappointed in the role that the NAACP has played in the new lawsuit and last year’s, saying the group “is defending schools that are failing our children.”
Mr. Walcott cited the performance numbers of the schools on the closure list. For the elementary and middle schools, he said average English-language proficiency is 16%, compared to 42% citywide. In math, it is 19% versus 53%. The average graduation rate of the closing high schools is 49%, compared with the city’s average of 63%, the DOE said.
“These figures are not something to brag about,” Mr. Walcott said. “They should be with us,” he said, referring to the union.
Write to Barbara Martinez at Barbara.Martinez@wsj.com
Living Wage Bill in NYC
Crains New York had a good piece on the living wage legislation currently being debated in NY. “The Bronx lawmaker said the bill, which would compel employers at projects that receive city subsidies to pay $10 an hour plus benefits, or $11.50 without benefits, is designed to “build a stronger economy,”.
I’ve spoken in earlier posts about the need for economic impact studies in NY with regard to financial legislation — just as construction projects necessitate an environmental impact study in order to assess the pros and cons and to find out the true cost, the same process should be applied to economic legislation. A bill such as this perfect fodder for this type of assessment.
LIVING WAGE BILL GETS WATERED DOWN
Councilman Oliver Koppell, the primary sponsor of the City Council’s controversial living wage bill, has been writing to its opponents in recent weeks to explain its “core rationale” and to propose ways to narrow its scope.
The Bronx lawmaker said the bill, which would compel employers at projects that receive city subsidies to pay $10 an hour plus benefits, or $11.50 without benefits, is designed to “build a stronger economy,” and that it was never intended to apply to nonprofits, small businesses and residential projects.
He said he’s considering broadening an exemption to carve out small businesses with annual revenues of $1 million or less; raising the subsidy threshold that triggers the bill to above $100,000; clarifying that certain subsidies like the Industrial and Commercial Abatement and J-51 incentives are exempt; and reducing the record-keeping requirement to six years from 30.
A source close to the Council said the subsidy threshold could be bumped up to as high as $1 million and the small business exemption could be raised to as much as $5 million.
In an interview, Mr. Koppell said the proposed amendments stem from testimony provided by opponents at a City Council hearing on the bill last month. “We don’t want to do anything that will discourage economic activity,” he said. “There are some clear issues raised at the hearing that should be taken care of.”
Proponents of the bill say the city should not subsidize projects that create “poverty-wage” jobs. They argue that stores benefit indirectly from subsidies granted to their landlords, and thus it is fair to ask them to pay more than the state minimum wage.
Opponents, however, contend the bill is flawed beyond repair and say amending it will not satisfy them.
“Koppell is trying to change the bill primarily because there has been broad opposition voiced to the legislation from across all five boroughs,” said Nancy Ploeger, president of the Manhattan Chamber of Commerce, a member of the Five Boro Chamber Alliance, which is leading opposition to the bill. “Wage mandates, regardless of amendments from the City Council, are a nonstarter from the perspective of the business community.”
Ms. Ploeger said she has written to Mr. Koppell on behalf of the coalition offering to meet with him to “discuss ways to promote job creation” in the city. “This bill is not one of them,” she said.
Proponents of the bill said they consent to Mr. Koppell’s proposed changes. “We’re trying to get a bill passed,” said a spokesman for the Living Wage NYC coalition, which is led by the Retail, Wholesale and Department Store Union. “These changes actually strengthen the bill while keeping its core focus the same.”
The bill has 30 sponsors in the City Council, four shy of the number needed to overcome a veto by Mayor Michael Bloomberg, who has expressed disdain for wage mandates.
But City Council Speaker Christine Quinn, who decides whether the bill comes to a vote, has yet to take a stance on the measure. She did meet with Mr. Koppell to discuss the revisions and expressed appreciation for his willingness to compromise. But she is focused on crafting a city budget for the fiscal year that begins next month, not on living-wage legislation.
“Basically, I think the speaker’s view on the bill is ‘let’s get the budget done,’ Mr. Koppell said.
Sick Pay Votes Boos Bill in NY
Having solved all other fiscal problems in NY, our legislators are working to kill more businesses with this bill. Below is an article from Cranes New York
Advocates for a law requiring city businesses to offer their employees paid sick days step up their efforts as similar measures advance in Connecticut and Philadelphia.
Connecticut legislators are about to pass a bill to make their state the first in the nation to require employers to provide workers with paid sick time. And City Council members in Philadelphia are expected to vote Thursday on a bill mandating up to seven paid sick days per year for workers.
With that momentum, advocates in New York City are stepping up efforts to revive a sick-pay bill shelved last year by City Council Speaker Christine Quinn over concerns that it would harm small businesses.
“Making sure New Yorkers can take a day off when they are sick or need to care for their children—without having to miss a paycheck or worry about losing their job—is the right thing for workers,” said Councilwoman Gale Brewer, the bill’s lead sponsor. “Our neighbors [Connecticut and Philadelphia] recognize the same logic and know it’s the right thing for businesses, too. The time has come for paid sick days in New York City.”
The Council bill is being pushed by the New York State Paid Family Leave Coalition, an alliance of more than 400 labor, community, business and women’s groups. As in Connecticut, where lawmakers could vote Friday or Saturday on sick pay, the local chapter of the Working Families Party is an active member of the group. Members are meeting regularly and expect to soon re-launch a public campaign geared towards bringing the bill to a vote this fall.
Ms. Brewer said she will be meeting with fellow Council members to let them know about the developments on sick pay around the country.
Her bill would require businesses with 20 or more employees to offer nine sick days a year and smaller businesses to give five. It has 35 sponsors in the Council, one more than needed to overcome a potential veto by Mayor Michael Bloomberg.
Despite her members’ sponsorship, Ms. Quinn did not let the bill get to a vote last year, contending it would have a crushing impact on small businesses in a down economy. She promised to revisit the issue every two months, assessing whether economic conditions had improved.
The city’s economic recovery has outpaced that of the nation, with the five boroughs adding nearly 40,000 jobs in the first four months of the year, according to real estate services firm Eastern Consolidated. In the past 19 months, the city has recovered more than half of the jobs lost in the downturn, while the nation has recovered only about 20% of its losses.
“Even though the city’s fared better, we’re far from seeing the light at the end of the tunnel, especially when you’re looking at small businesses,” said Linda Baran, president of the Staten Island Chamber of Commerce, part of a coalition of chambers that led opposition to the bill last year. “Locally, I don’t know any small businesses that are hiring. They’re concerned about making their payroll.”
Carl Hum, president of the Brooklyn Chamber of Commerce, said that one only need to look at Friday’s weak national jobs report to know that the economy is “still pretty fragile.” He said that the Connecticut bill appears to be moving forward “over the objection of business groups” and that “the difference here in New York is that we have a speaker that brought the business community in to talk about the bill.”
A spokesman for Ms. Quinn said that conversations with Ms. Brewer about paid sick days are ongoing. Ms. Brewer said that the speaker has asked about the upcoming vote in Philadelphia. It’s unclear if she will be swayed by efforts in other states, which are being led primarily by the 15-state consortium Family Values @ Work.
In addition to the votes in Connecticut and Philadelphia, the Seattle City Council is set to introduce a sick-pay bill on Wednesday; a bi-partisan group of state legislators in Georgia led by five Republicans is supporting a measure to allow workers to use sick time to care for children and other family members; and a coalition in Denver is pressing for a ballot initiative on sick days in November. San Francisco and Washington already require paid sick days.
The White House has also entered the fray, hosting a series of workplace flexibility forums—including one in New York City this week—designed to help American workers meet the demands of their jobs without sacrificing the needs of their families.
“We know New York is different, and we’re willing to work towards what would make sense for everybody,” Ms. Brewer said. “But I’m hoping that the national momentum pushes us here.”
Social Security and Scott Rasmussen
Having dinner with Scott Rasmussen a couple weeks ago, we got onto the subject of Social Security. He remarked that people have different ideas about Social Security reform. Some people suggest raising taxes or the retirement age, other people want to go with privatization, still others propose reducing the benefits. Interestingly, Scott had a entirely different idea that is simple but brilliant.
Here’s the scope: Allow each Social Security recipient the latitude to pick how he wants his money accrued and allotted. For instance, if you want to retire at 70, then you can. If you want to retire at 65, so be it. If you want to increase benefits, you can tweak your contributions as such. With each person controlling the time frame and/or amount to be collected and reserved, this solution alleviates that one-solution-fits-all approach to reform that undoubtedly helps some and hurt others.
I think Scot’s idea has great potential.
Congressional Duplicity
Some years ago, Congresswoman Carolyn Maloney of New York came to me about a “saving for college credit” she wanted to sponsor to have implemented into the Internal Revenue Code. The concept was that if people put money into government bonds, and then used the bonds for college, they’d never have to pay interest or taxes on that money. I informed her that several years before, that provision had already been put into the code and was part of our current tax law. She then asked if I could help her think of a benefit that was a little different, so that she could call it her own.
I was reminded of this episode recently when the GAO report documenting the massive duplication of government programs was released. Although the report was helpful in uncovering billions of wasted taxpayer dollars, it made me think — why isn’t anyone talking about the failure of Congress implementing these programs in the first place? It has to be one of two scenarios: either a) due to their incompetence — they didn’t realize it was duplicative at the time, or b) they knew it was wasteful but didn’t care as long as they gained political advantage.
The GAO report is not only a staggering denunciation of how our Congress really conducts business, but it also raises some difficult yet necessary questions: why is there is virtually no discussion about what Congress is going to do to ensure this kind of abuse of taxpayer money is not repeated? How are we going to now make sure that future legislation doesn’t result in a duplicative or redundant program?
But even more important– the GAO report should be viewed not only as a mechanism to reduce the budget going forward, but also as a major indictment of our legislators’ past actions. We should look at the repetitive programs, find out who sponsored them and pushed them through, and hold them accountable for all the billions of dollars wasted upon the backs of the taxpayers throughout the years. Only when those who have been responsible for the problems actually take responsibility for their actions can reform truly occur.