Talking about Taxes in Tea Party Times

Ron DeutschExecutive Director

New Yorkers for Fiscal FairnessDecember 14, 2010

Where we aretoday . . .

We must lower the heavy tax burden thatprevents businesses from investing in facilitiesand payrolls and instead forces them toconsider relocating to tax friendly states like‐South Dakota or Texas. Repealing job killing tax‐increases will unleash our employers to hirenew workers. We must lower the tax burden forall individuals and job creators.‐‐Scott WalkerIncoming Governor, Wisconsin

At a time when America is facing economic crisis, Congress should be looking for ways to stimulate our economy through sound,responsible economic development policies.Allowing these tax rates to increase will only hurt our ailing economy by taking more money out of our families’ wallets.-- Excerpted from “Extend tax cuts to all Americans”Rep. Phil Roe

Recent Polls tells us that Americans…

• … distrust government.• … think it’s too big and doing too manythings.• … don’t see how it benefits their lives (evenwhen it has)• …believe state government could spendless and still provide the same level ofservices.

But,….. they (still) …..

..... are split on whether they prefer moreservices/higher taxes. ….believe programs are important.

And, they are worried about consequences…

And, they are willing to pay more taxes to maintain funding for public schools and health and human services. (Source: Pew, Oct 2010)

Most recent Sienna Poll found:

The Government Reform Knot:were all tied up!

Government/Economy/Taxes/Budget

NYS Revenues and Expenditures

Where Does the Money Come From and Where Does It Go?

Taxes in NYS:Inequities in our Tax Structure

From Fiscal Policy Institute Report:

Current Personal Income Tax Rate Structure - with temporary top rates (joint filers): 2009-2011

–4% on income under $16K–4.5% on income between $16K and $22K–5.25% on income between $22K and $26K–5.9% on income between $26K and $40K–6.85% on income between $40K and $300K –7.85% on income between $300K and $500K–8.97% on income over $500K

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For example, State aid is LESS THAN 43% of the total $46 billion dollar education budget.

S hare of R ev enuesFederal6.13%

Local

50.94%STAR6.96%

State Aid35.96%

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65Source: Fiscal Profiles 2005-06, New York State Education Department

66

New York ranks 31st among the 50 states in terms of the state’s share of funding for public elementary and secondary education.

47.0%43.9%

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66Source: US Census Bureau, Public Education Finances, April 2007, Table 1; Ranking by Fiscal Policy Institute

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School tax levies are not alone in driving the property taxes higher. Since 2000, tax levies have grown for all taxing jurisdictions, not just school districts.

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67Source: OSC, Overlapping Real Property Tax Rates.

6868

For many upstate counties, school taxes represent less than half of total property taxes.

PUTNAM 71% SULLIVAN 54% WYOMING 48%SARATOGA 71% TOMPKINS 54% OSWEGO 47%SUFFOLK 64% MONROE 54% HERKIMER 47%ORANGE 63% ONONDAGA 53% CAYUGA 46%DUTCHESS 63% BROOME 53% ERIE 46%ALBANY 63% ONEIDA 52% STEUBEN 46%ULSTER 61% WAYNE 52% YATES 45%WARREN 61% LIVINGSTON 51% CHAUTAUQUA 44%ONTARIO 61% ORLEANS 51% ST. LAWRENCE 44%ROCKLAND 60% MADISON 51% FRANKLIN 44%NASSAU 60% ESSEX 51% SCHUYLER 42%COLUMBIA 57% SENECA 50% CHENANGO 42%CLINTON 57% DELAWARE 50% JEFFERSON 41%OTSEGO 57% SCHENECTADY 50% MONTGOMERY 41%GENESEE 57% SCHOHARIE 49% LEWIS 40%STATEWIDE TOTAL 56% HAMILTON 48% CATTARAUGUS 39%GREENE 56% NIAGARA 48% CORTLAND 39%WESTCHESTER 55% WASHINGTON 48% FULTON 37%NEW YORK CITY 55% CHEMUNG 48% ALLEGANY 37%RENSSELAER 54% TIOGA 48%

Source: OSC, Overlapping Real Property Tax Rates. School tax levies (excluding STAR) as a percent of total levies: 2005

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New York is one of the few states that asks local governments to pay a share of Medicaid costs. The property tax "burden" related to Medicaid spending varies greatly across counties and the Medicaid cap institutionalizes these disparities.

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Tax Rate Per $1000 of Taxable Full Value Necessary to Cover Local Share of Medicaid Costs, excluding New York City at $9.78 per $1000.

Sources: 2003 Medicaid Expenditures from NYS Department of Health. 2003 Full value from Office of State Comptroller.

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Property tax issue in New York is complex and often misunderstood.

• School taxes make up 60 percent of the levy “on average” but in some counties other costs are driving increases.

• STAR Exemptions do not reduce school districts’ levies. Rather they provide for the state to pay part of the levy.

A NEW NY AGENDA?Governor Cuomo’s Fiscal Policy Proposals:

The DRACUOMIAN Emergency Financial Plan

•Freeze Taxes. Andrew Cuomo says that he will not raise and will veto any increase in personal or corporate income taxes or sales tax.

•Impose a State Spending Cap. Enact a statutory and constitutional spending cap that limits growth to the rate of inflation. Only in the event of extraordinary circumstances, may the Governor, with the agreement of a two-thirds supermajority of both houses of the Legislature, authorize spending in excess of the cap.

State Spending CAPS: A Bad Choice for NYS Colorado is the birthplace of the State Spending Cap. In 1992, Colorado enacted a Taxpayers Bill of Rights (TABOR), a constitutional amendment that limits the annual growth in state revenues and expenditures. In recent years, anti-government groups have pushed spending cap proposals like Colorado’s in numerous other states.  These proposals have gone under a variety of names, such as “Tax and Spending Control” (Nevada) or “Stop Over Spending” (Michigan) and now the “State Spending Cap” in New York. Unfortunately these types of caps can have very negative consequences.

•Colorado’s State Spending Cap contributed to a significant decline in public services in Colorado.  It resulted in:•Colorado declined from 35th to 49th in the nation in K-12 spending;•higher education funding dropped by 31 percent;•Colorado fell to near the bottom of national rankings in providing children with full, on-time vaccinations; and•the share of low-income children in the state who lacked health insurance doubled, making Colorado the worst in the nation by this measure.

Impose a Property Tax Cap. The Governor is proposing a cap on property taxes for all school districts and local governments, set at the lower of the inflation rate or two percent, whichever is lower, with a 60 percent majority vote needed for an override.

Property tax caps have created havoc across the nation in terms of funding local services. Instituting this type of cap would be a particularly bad idea for NYS, especially at a time when the state is looking to cut the state share of spending going to school districts and municipalities.

The state is already paying less than the average national share for school aid and continues to shortchange municipalities by reducing local AIM (Aid and Incentive to Municipalities) each year. To think we will be able to reduce property tax burdens by simply imposing a cap is naïve and reckless. It is a sound bite solution to a complex tax problem that needs to be addressed based on need.

Tax caps WILL NOT lower anyone’s taxes These are “caps” not cuts.Tax caps WILL NOT ensure that residents’ taxes won’t go up more than a small amount each yearTax caps will do nothing to prevent the property tax increases due to reassessments and tax cap overrides and new fees for essential services which are common place in locales with tax caps.Tax caps WILL NOT help anyone who can’t afford their current property taxesPeople who are unable to pay their property taxes will have no tax burden relief for their current situation.Tax caps WILL make the local revenue system more regressiveTax caps can exacerbate disparities across the state leaving lower-income communities even worse off relative to their higher-income counterparts. Tax caps WILL NOT change the main drivers behind higher property taxesCaps on property taxes do not change the rapidly rising costs facing localities Tax caps cannot slow the increase in the cost of fuel, for example, which reflects forces outside of the control of local officials.Tax caps WILL NOT change the demand or need for local servicesWhile residents continue to need all the current local services they received prior to the initiation of tax caps in many circumstances, these caps do not allow local governments to continue their current level of public services, much less make any improvements demanded by residents. State aid to localities may be promised to help localities but this promise is unlikely to be sustained over time, especially during economic downturns. Tax caps WILL impair public safetyTax caps greatly hinder localities’ ability to maintain the current level and quality of public safety by limiting the local’s ability to pay for police and firefighters. Tax caps WILL impair the quality of K-12 public educationTax caps have shown to be the main agent in the deterioration of the public school systems in virtually every state that has imposed these property caps. Tax caps WILL lead to deteriorating streets and roadsTax caps in locales across the country have resulted in poorly maintained and often times dangerous street and road conditions.TAX CAPS WILL NOT SOLVE THE PROBLEM OF HIGH PROPERTY TAXES THEY WILL COMPROMISE THE QUALITY OF LIFE IN NYS

NYS Budget Timeline: Important Dates and

Opportunities

Ron Deutsch, NYFFwww.abetterchoiceforny.org

January 2011

State of the State Address: On January 5, 2011, Governor Cuomo will give the annual State of the State address. In this speech he will detail the policies and programs that he would like to put in place to move the State forward.

Advocacy opportunity: For organizations working on the budget this is a good time to weigh in on the Governor’s speech. It is a good time to put together comments from your organization and get them to the LCA Press reporters covering the Capital (http://lcapressroom.blogspot.com/2007/01/press-room-directory.html). Comments should relate to what the Governor was talking about in his speech and should be directed to reporters covering the area of the state that you live in.

It is also a month long opportunity to meet with the Governor’s Staff and Division of Budget staff that will be crafting the budget. It is a time to make your case as to why your policy issue/funding/proposals should be included in the Executive Budget Proposal.

February 2011Executive Budget Released: Since Andrew Cuomo is an incoming Governor he has until February 1st to release his Executive Budget (usually it is released in January on the second Tuesday, following the first Wednesday, after the first Monday). The Executive Budget will detail exactly how Cuomo plans to close the $9+ billion budget gap the state will face for the coming fiscal year. He will release both appropriations bills and language bills with his executive budget proposal.Advocacy Opportunity: This is another opportunity to weigh in on the budget document itself. You can either contact LCA Press members with Press Releases (more explanatory and detailed) or Press Statements (statement from a notable figure with in your organizations). If we have detailed information about something objectionable in the budget it is a good time to hold a rally or action to get some press attention to the topic or cause you care about.

Legislative Budget Hearings: Very shortly after the release of the Executive Budget, the Legislatures’ joint fiscal committees (Assembly Ways and Means and Senate Finance) will hold public hearings where the State Agency Commissioners and the public will have an opportunity to comment on the proposed cuts contained in the Executive Budget Proposals. Advocacy Opportunity: This is also a good time to get members of your organization to testify at these hearings. You need to register right away – as soon as they are announced as speaking slots fill up quickly. If you are unable to get a speaking time – this is also potentially a good time to plan an action or rally outside of the hearings. There is always a lot of press at the beginning of the hearings and then it starts to wane toward the end.

March 2011Revenue Forecast: Under State finance law, prior to March 1, the Director of the Division of the Budget, the Secretary of the Senate Finance Committee, and the Secretary of the Assembly Ways and Means Committee must issue a joint report containing a consensus forecast of the economy and estimates of receipts. One House Budgets/Resolutions: Sometimes the Assembly and Senate will either issue a complete one house budget (very detailed) or a budget resolution (less detailed and more of an outline). They do not always do this – but it is usually useful because it identifies what the priorities of each house are. Conference Committees: While Conference Committees are supposed to occur as part of the budget process they do not always happen. I believe that Governor Cuomo is going to ask for conference committees and may in fact structure his Executive Budget proposal to correspond to the Legislatures’ pre-established conference committee structure.

Advocacy Opportunity: March is a critical time for advocacy. If the legislature is preparing one house budgets/resolutions it is very important to try and get your issue/policy/funding into their budget proposals. If you are not in the Executive Budget or the Legislature’s budget proposals it is very difficult to become part of the final budget (although nothing is impossible in Albany). March is usually the busiest month at the Capital. It is the time when our elected officials are cutting deals and finalizing budget negotiations. It is the most critical time to lobby/educate on your issues. You need to build a critical mass of support to move your policies issues forward.

April – Whenever?

April 1st: Start of New fiscal year – The final Budget is supposed to be adopted by this date. If history is any guide, it is usually not. During this time period budget negotiations can be fast and furious. Often deals are announced multiple times before a final deal is reached. Advocacy Opportunity: If the budget does not pass on time then much of the advocacy described in the March section is still in play. Nothing is done until everything is done in Albany when it comes to budgets.

Important websites/numbers:

Division of Budget: www.budget.state.ny.us

Assembly: www.assembly.state.ny.us

Assembly switchboard: 518-455-4100

Senate: www.nysenate.gov

Senate Switchboard: 518-455-2800

Fiscal Policy Institute: www.fiscalpolicy.org

NYFF: www.abetterchoiceforny.org