HAVE LESS, PAY MORE — Frank Mauro of the Fiscal Policy Institute points out the regressiveness of NYS taxes at Albany press conference. — Photo by Deborah A. Miles
Coalition: Fairer taxes, less wasteful spending could save public services
Cutting public services and shifting the tax burden to localities is not the best way to balance the 2005-06 state budget, according to PEF and more than 100 community, religious, education, health care, labor and human services organizations from throughout New York state.
They issued a joint statement February 17 at a press conference in Albany endorsing alternatives to the Executive Budget’s proposed cuts in essential state services and opposing its proposed tax shifts to local property taxes and other regressive taxes and fees.
The speakers called on New York’s elected leaders to enact spending reductions and revenue increases that do the least harm to the state’s economy and to New York’s working families.
The coalition released a seven-point platform for solving the state’s budget deficit and restoring funding for critical programs and services:
• Close tax loopholes that allow large, profitable multi-national corporations to avoid paying their fair share of state taxes — savings $1 billion;
• Stop sweetheart deals with high-priced consultants who are being overpaid to do jobs that state workers can do better and cheaper — savings $250 million;
• Lower drug prices for state and local governments by using New York’s purchasing power to get a fair deal from the drug companies — savings $1 billion.
• End abuse of Empire Zones and other economic development programs and reform the operations of New York’s public authorities — savings $290 million;
• Recover unclaimed bottle deposits from the beverage bottling industry — $179 million in recovered revenue;
• Make polluters pay through purchase of auctioned permits for Gov. George Pataki’s plan to cap global-warming gases — up to $500 million in revenue; and
• Make state’s tax system fairer by increasing the top marginal tax rates on the highest income households — $2 billion to $7.7 billion in revenue.
Corp tax deadbeats
A new study released last week by two national think tanks — Citizens for Tax Justice (CTJ) and the Institute on Taxation and Economic Policy (ITEP) — reaffirmed the coalition’s position that corporations in New York state are not paying their fair share of state corporate income taxes.
The study looked at the 252 Fortune 500 companies that reported profits in all three of the years studied (2001, 2002 and 2003). The 252 firms examined also disclosed state and local corporate tax payments in filings with the U.S. Securities and Exchange Commission.
Of these 252 corporations, 71 paid no state income taxes in one or more of the three years studied, and 17 had average effective state and local corporate income tax rates of 0 percent or less for the entire three-year period.
“Unfortunately, current SEC rules only require publicly-traded firms to disclose their state and local income tax payments on a 50-state aggregate basis, so we do not know how much these firms are paying to New York or any other state,” said Frank Mauro, executive director of the Fiscal Policy Institute. “But we do know the decline in state corporate income tax payments is affecting New York.”
“This study confirms what we have said for the last several years: New York’s corporations are not paying their fair share of taxes to support the public services they use and all New Yorkers need,” said PEF President Roger Benson.
“Overall, most of the major corporations doing significant business in New York paid less than 3 percent of their profits in corporate income taxes between 2001 and 2003,” Benson said. “The rest of us pay about 3.7 percent of our income in state income taxes. Ordinary taxpayers and small businesses must play by the rules, and so should big business.”
Upside-down taxes
The coalition also questioned the fairness of the state’s personal income tax structure.
Because of New York State’s heavy reliance on property and sales taxes, low- and middle-income families are currently paying between 11 percent and 12.6 percent of their income in state and local taxes, while the best-off families have a much lower average effective tax rate — 6.46 percent.
According to Robert McIntyre, ITEP’s tax policy director, “New York’s income tax fails to offset the regressivity of its sales and excise taxes, giving the state an unfair and regressive tax system. Taxes ought to be based on people’s ability to pay them, which means that the share of income paid in taxes should rise as income grows, not fall as is the case in New York.”
RICH GETTING OFF EASY — NYSUT Exec. V.P. Alan Lubin and PEF President Roger Benson review tax chart at February news conference in Albany. — Photo by Deborah A. Miles
“We face a crisis in New York,” said Alan B. Lubin, executive vice president of NYS United Teachers. “The courts have mandated that New York make a stronger investment in education, but Albany doesn’t know how to pay for that investment. One proposal would be to replace our current tax tables with the state’s 1972 tax brackets. Under this proposal, 95 percent of all New York taxpayers would pay less than they do now, and the state would collect $7.7 billion more in revenue. By asking a little more from the wealthiest New Yorkers, we can pay for the (court-mandated) solution and give almost every New Yorker a tax cut.”
Lubin said that, under the 1972 tax-bracket scenario, a married couple with two children filing jointly and claiming the standard deduction would have to have an adjusted gross income of more than $240,000 in order to be subjected to a tax increase. Similar families with lower incomes would receive a tax cut.
“That’s a true sign of a progressive, fair income tax.” Lubin said.
Sweetheart deals sour
The coalition also called on state leaders to put sweetheart deals with contractors, vendors and buyers of state assets that cost state taxpayers millions of dollars permanently off limits.
Benson criticized the state’s use of costly consultants to do work that state employees can do at half the cost.
“Based on the findings of the state Department of Transportation’s own study, it could save more than $123 million annually just by using more state engineers,” he said.
“And when other state agencies’ use of consultants is considered, the state could save at least $250 million a year by requiring a cost-benefit analysis before a state agency is allowed to contract for personal services.”
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