Politics or Progress? New Yorkers Need to Decide!
To recover from the disastrous impacts of COVID-19, the divisive class warfare that has characterized New York politics in recent years must end.
New York emerged stronger from past crises because we worked together to forge practical solutions to our fiscal and economic problems. In contrast, what we hear most from politicians and advocates today are punitive budget and legislative proposals that are bound to alienate the state’s most prolific job creators and taxpayers whose support we need, along with organized labor and community leaders, to restore our economy, increase our tax base, and to fight for aid from Washington D.C. that was largely denied us during the Trump presidency.
President Biden, in partnership with Brooklyn’s own U.S. Senate Majority Leader Chuck Schumer, is striving to unite the country around a recovery agenda. New York needs to follow their lead.
The American Rescue Plan released this week by the Biden administration is a welcome reversal of federal policies that put a bull’s eye on our nation’s highly taxed, “blue” states and sanctuary cities. It proposes almost $2 trillion in relief that should be enacted and distributed quickly, like disaster relief, proportional to the extent of COVID-19 damage.
New York stands to benefit from other federal initiatives: an increased allocation of vaccines, a long-awaited $2 billion Medicaid supplement, an additional $4 billion to reduce the MTA deficit, and expedited approval of the Gateway Project. In the works are an ambitious federal infrastructure program, a path to citizenship for undocumented residents and DACA recipients, forgiveness of $13 billion in loans to relieve state unemployment insurance burdens, and the possible reinstatement of full deductibility of state and local taxes that cost New York taxpayers as much as $15 billion annually.
Of course, we cannot expect that the gap left by COVID-19 in the state and city budgets or the New York economy will be entirely filled by federal largesse. New York City alone has suffered a net loss of half a million jobs, highly concentrated in small business, travel and tourism, hospitality and entertainment, and the nonprofit sectors. Commercial real estate values have suffered, and the unpaid backlog in residential and commercial rents and mortgages is still to be calculated.
State and local governments have made huge, unanticipated expenditures to fight COVID-19, which struck New York earlier and harder than anywhere else in the country. Tax revenues have also fallen, especially city real estate and sales taxes, which are expected to decline nearly $3 billion in the coming fiscal year.
Finally, there are many legitimate demands for more government spending that predate the pandemic, such as increased homeless services and affordable housing, upgraded public housing, and enhanced aid for public education and job training.
Federal aid is never going to address all these needs, but certainly gives New York the runway to avoid big spending cuts, layoffs, and tax increases that would slow rehiring and dampen economic growth. The question is whether elected officials are prepared to create a process for crafting solutions that are real and sustainable, not just a quick fix that will rapidly unravel and fail to achieve the desired results.
Examples of popular (populist?) proposals that will NOT work include the stock transfer tax (a tax largely on the retirement savings of workers where proceeds would evaporate as transactions are moved out of New York to avoid it); a wealth tax (even its proponents admit it is unconstitutional and that New York would not long be home to many billionaires); a pied-à-terre tax (luxury condos have lost their luster as an investment during the pandemic); or a significant increase in the millionaires’ tax (essentially a tax on downstate residents’ incomes that will be uncollectible as high earners desert the state).
So, what can we do, in addition to accelerating economic recovery, to bridge any shortfall in federal aid? It will take creative solutions that accomplish multiple benefits. One good precedent is congestion pricing, which is designed to raise revenues AND reduce costs associated with pollution and traffic congestion. Mobile sports betting – run through casinos that have been hard hit by COVID-19 shut downs – is a good start. Expanded sales taxes that include protection for lower income households were recommended by a bipartisan commission in 2013 but never seriously considered in Albany. A long overdue increase in the gasoline tax would raise revenues in the short term and accelerate achievement of our environmental goals. A public-private effort to scrub the tax code for opportunities to reduce credits and loopholes is also in order.
Over a decade back, the Partnership for New York City recommended that the state could raise more than $1 billion annually by self-insuring title on properties that are changing hands, rather than ceding this easy income to title insurance agents. After much research and collaboration, Senators Alessandra Biaggi and Brad Hoylman have been champions and Senator Jessica Ramos has introduced legislation that would make it happen. More recently, Governor Cuomo proposed a temporary personal income tax surcharge on very high earners that would be partially offset by a future tax credit for those who maintain New York as their permanent residence. This is the kind of creative approach that can gain support and momentum, even from those who will pay it.
The fiscal gap is not as large as we once feared and closing it can be accomplished through cooperative discussion and analysis of both savings in spending and revenue-raising opportunities. Those who are seeking punitive taxes against the rich or Wall Street appear blind to opportunities to develop practical solutions that we all can live with.
New Yorkers cannot let our essential pragmatism, that has served us so well in the past, be drowned out by zealots whose objective seems less about progress than politics. That may have been tolerable in prosperous times, but it is not acceptable during a pandemic.
Kathryn Wylde is President & CEO, Partnership for New York City.