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November 19, 2002

Report: To address fiscal challenge, Albany should choose spending restraint, not higher taxes

In confronting a budget shortfall estimated at $5 billion or more, New York State lawmakers should ignore pressure for higher taxes already coming from pro-spending groups, according to the latest state budget analysis by The Public Policy Institute of New York State.

"Taxes in New York are already second-highest in the country, on a per-capita basis, behind Connecticut," The Institute said today in a report entitled "Albany Has Cut Taxes—But They're Still Too High." The report is the latest in The Institute's Budget Watch '03 series. The new report is posted at www.ppinys.org/budget/budget_watch_03_issue4_taxes.pdf.

"That's why Governor Pataki is absolutely right to insist that tax increases will not be considered," the report added.

Major tax cuts approved in recent years by Governor George Pataki and the state Legislature "have helped bring our 'tax gap' compared to the average of all states from 61 percent in 1992 down to around 50 percent in 1999," the report noted.

The report noted that:

But some organizations that live on taxpayer funding are calling for higher taxes. The state AFL-CIO, for example, has urged a multi-billion-dollar increase in personal-income taxes.

But the report added: "Even some other union leaders are recognizing that raising taxes can harm the economy. In New York City, construction unions are fighting a proposed property-tax increase for fear that it will reduce real-estate values and thus new construction," the report noted.

Cost-shifting—the practice of moving government obligations and costs from Albany to local governments—will solve nothing, the report noted, because "local taxes in New York are the highest in the country, and more than double the national average, at $2,388 per capita."

The Institute, the research affiliate of The Business Council, launched Budget Watch '03 earlier this month to focus attention on spending issues that are at the root of the state's looming fiscal challenge. If the state had held overall state-funds spending to the rate of inflation over the last five years, the state could have saved $7.9 billion.

Reports in the series will be issued once or twice a week as the state budget debate unfolds. They can all be accessed from www.ppinys.org/bwatch03.htm.