Monday, April 21, 2003

A Modest Proposal
(although this post refers to the budget situation in NY, the same logic can be applied elsewhere)
The State of NY finds itself in an $11.5 billion hole for the fiscal year that just began on April 1. The Governor's proposed budget was declared dead on arrival by legislative leaders, public employee unions and spending advocates. Instead, the two houses are looking at closing corporate tax loopholes and implementing a temporary income tax surcharge on upper incomes. But before looking to take more money out of private hands there are steps the legislature should take to narrow the deficit.
First, legislative leaders should put their money where their mouths are and refuse to accept lulu's (additional salary for chairmanships and leadership positions), this wouldn't solve the state's fiscal crisis, but it would send a massage about sharing the pain of tough cuts. Second, there should be no pork in the budget, in the form of member items. Politicians should not be able to buy votes with the public treasury at ANY time, but especially not now. Further, any member item that is more than one year old should not be re-appropriated and that money should be swept back into the general fund. Now, one could argue that money was legitimately provided for whatever organization, however if the group has not accessed it in over twelve months than perhaps they didn't really need the money and it should go back to the public coffers to be used for more pressing concerns like school aid. The legislature must also look for wasteful spending in government. With an almost $90 billion budget, there has to be at least a few billion dollars of waste.
All of these suggestions require a certain degree of intestinal fortitude that most members of the legislature have never exhibited, so we should probably not expect it of them now. It is far easier to raise taxes and play the class warfare game. After all, upper income folks are a small percentage of New Yorkers, and are probably outnumbered by members of public employee unions and other big government advocates.
I should note that I do favor the elimination of corporate tax loopholes. Not because I think corporations should pay more taxes, but because corporations should be treated equally and none should get a special benefit because of their lobbying power and clout. That is not true free market capitalism. But let's be honest and admit that it is not corporations who pay taxes, it is individuals. The economic reality is that depending on the elasticity of demand of the good or service a corporation will either pass on the tax to consumers in the form of higher prices or will pass it along to shareholders in the form of lower dividends (or some combination thereof).


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