|
There was a hot debate in the City Council last week over increasing city taxes. It came on the heels of Mayor Bloomberg’s proposal to raise more than $300 million in new taxes and, by 2006, $800 million a year through congestion pricing and tolls—and it coincided with revelations about massive fraud in the Finance Department.
The mayor’s proposed hikes in tolls and the cigarette tax and the support in the Council for tax increases reflect a harsh reality: Spending cuts alone won’t solve the city’s short-term budget crisis or its historic structural deficit.
But instead of just increasing taxes, the mayor and Council need to take a serious look at a comprehensive reform, because city taxes are too high, complex and unfair:
Too high: An Independent Budget Office study found that New Yorkers bear the nation’s highest municipal tax burden. Now wonder Bloomberg worries that new taxes could hurt the city’s effort to retain and grow jobs.
Complex: For generations, the city’s response to fiscal crises has been new layers of taxation, creating a hopeless tangle of unique levies, including the commercial rent tax and even a tax on horse race admissions.
Unfair: The indictments of city tax assessors points to systemic corruption. Even more common is tax inequity. More than 100,000 low-income New York families pay no state or federal taxes but still pay local taxes because the city lacks an earned-income tax credit. And experts have long recognized a disparity between property taxes on one- and two-family houses and apartment buildings.
What the city needs is a fairer, simpler system with some New Yorkers paying more, but many residents and small businesses paying less.
For example, the city could impose targeted property tax increases while reducing the regressive sales and energy taxes. Under this proposal, residential property owners, who earn roughly double the income of renters, would bear a higher tax burden. But more working- and middle-class New Yorkers would benefit from the sales tax cut. And the residential property tax increases would be partially offset by deductions from federal and state taxes.
The sales tax cut would spur local spending, while increased reliance on the property tax would increase the stability of city revenues. The city also should reduce the number of taxes through elimination or consolidation.
Other taxes might have to increase. The mayor has justified his cigarette tax hike as a way to reduce teenage smoking. Similar social policy arguments can be made for other changes. For example, the city generates about $25 million a year in taxes on beer and alcohol. Research has found that increased alcohol taxes leads to less underage drinking and fewer auto fatalities. A Robert Wood Johnson Foundation-sponsored survey found that nationally 70% of respondents back higher taxes on alcohol to reduce other taxes.
Fairness and simplification alone are reasons to go forward with tax reform. But increased revenue also would mean fewer cuts to programs for kids and less need to rely on debt that those kids will still be paying off when they grow up.
Eichenthal is a senior fellow at the New Democracy Project.
|
