One New York: An Agenda for Shared Prosperity

(Rochester & Genesee Valley Area Labor Federation)James V. Bertolone, President, Rochester & Genesee Valley Area Labor Federation

The above is the title for the proposed economic agenda of the Fiscal Policy Institute (FPI), a non-partisan research and education organization that focuses on the economic well-being of New York State residents. I have written several critiques of the Business Alliance’s “Unshackle Upstate” and to be fair, my critiques require me to recommend positive alternatives for our region’s economic troubles. I will do so by writing several articles to highlight and summarize the FPI’s 50 page package of economic and fiscal policy recommendations for strengthening the economy in our region. Unlike “Unshackle’s” agenda which is dominated by business interests, the research that has resulted in FPI’s policy initiatives includes business, government, labor, community activists as well as policies from other states.

 
One New York contains nine specific initiatives. The first of these is one which has already generated much interest, “Reducing the Pressure of the Property Tax.” This multi-pronged approach to reducing property taxes recommends adopting a solution to the Campaign for Fiscal Equity lawsuit, restoring the state’s commitment to revenue sharing, basing each country’s share of Medicaid costs on its ability to pay, and the reform of the STAR Program.

 
In the area of “revenue sharing”, we already support the legislative push to fund local government through a transparent needs-based formula. This partnership between labor, business, government and community and religious leaders was established with the Fair Share Coalition that brought millions more to our community. Our effort needs to continue until Upstate gets its fair share of the state budget, and until the funding of local governments through a transparent needs-based formula becomes public policy in every one of our State’s budgets.

 
One cannot look at these initiatives without taking a hard look at our tax structure. There has been a significant loss of tax revenue in real dollars over a generation due to corporate loop holes and making the State income tax much less progressive than it once was. The Business Council of New York supports closing some of the corporate loop holes through New York’s Corporate Alternative Minimum Tax (AMT). This correction now requires all profitable multi-national and multi-state corporations to pay at least 2.5%, sometimes less, depending on benefits from programs like Empire Zone.

 
Over the last 30 years, New York State has made many improvements in its income tax system. These have included eliminating the marriage penalty and instituting a State Earned Income Tax Credit to provide relief to low income working families. But it has also cut the top personal income tax rate by more than 50% (15.375% to 6.85%) - and has eliminated the bottom 2% and 3% tax brackets. This has made the income tax much less progressive than it used to be, while greatly reducing the revenue that the state would otherwise have collected. We estimate, that if since 1972, the state government had indexed its personal exemptions and tax brackets for inflation rather than eliminating tax brackets from the bottom and the top of the rate schedule, 90% to 95% of all resident taxpayers would be paying less than they now pay but State revenues would be $8 billion higher.

 
By reducing the progressiveness of the income tax, New York State has also given significant tax relief to many high income residents of other states who work in New York State, primarily in New York City.

 
In order to accommodate the loss of revenue from changes in the State’s personal and corporate income taxes, New York has substantially reduced State revenue-sharing with its counties, cities, towns and villages and reduced the share of school district budgets covered by State aid. These changes have, in turn, put greater pressure on local property and sales tax bases. And when taxpayer resentment over these tax shifts grew, the state responded with the STAR program. Despite its inequities, STAR has been welcomed by homeowners. But it provides no relief to tenants or landlords, small businesses and others who are affected by increasing property taxes. These fiscal disparities in the STAR program disadvantage city school districts with high percentages of renters and high concentrations of children living in poverty.

 
These fiscal policies – reducing the top tax rates on personal income while cutting state aid to localities and putting pressure on the property and sales tax bases – combine to have a particularly negative effect on upstate New York. The New York City metropolitan area has the overwhelming majority of the State’s high-income taxpayers while upstate New York has a much smaller share of high-end taxable income than it has of the State’s population and service needs.

 
FPI’s recommendations to create good jobs is contained in the section titled “Make Smart and Strategic Investments”. We need to stop all use of our tax money to create low road jobs and only subsidize business investment for high road economic development. As “Unshackle Upstate” documents, the loss of good manufacturing jobs, with family sustaining wages and benefits, has not only devastated our community for people who held those jobs, but the loss of those dollars in our economy has fueled other job losses causing our young people to leave in droves. Many of “Unschackle’s” recommendations in this are consistent with FPI such as long term strategies in the State’s key industries and where we have cutting edge technology, educational institutions, while investing in our transportation, energy infrastructure and worker’s skills. The main difference between FPI’s One New York and “Unshackle Upstate” is “Unshackle’s” initiative to “Decentralize decision-making and putting power in the hands of local authorities is the best hope for turning state government into a partner rather than obstacle to Upstate’s economic success”. This strategy is not the solution, but the problem. According to FPI the state and local governments (and its public authorities) spend $3 to $4 billion annually in the name of economic development. The Syracuse Post Standard documents a half-billion in tax dollars each year going to firms that simply re-incorporate or reorganize to claim their workers were “new” employees. Myself and others have publicly documented abuses of Industrial Development Agencies (IDA’s) like COMIDA, subsidizing poverty level jobs, tax breaks to corporations that have laid off instead of creating jobs, and giving one company or contractor a competitive advantage over others with our tax dollars based on their political contributions. The corruption involving public authorities is even worse, especially the situation at our own Water Authority. We need statewide criteria where long range proposals meet required benchmarks that include an objective assessment to the benefits provided to the State, taxpayers and job creation. It is hard for me to believe that any real business undertakes a major investment without a coherent, long range strategy. These must be evaluated based on real criteria and benefits to communities, not based on local politics.

 
New Month I will continue to summarize the recommendations from FPI’s One New York. Those interested may access the document in its entirety at http://www.fiscalpolicy.org/

Published: Rochester Business Journal, January 26, 2008
Labor News, January 26, 2008