January 2, 2003
Council urges Governor Pataki to restrain spending, reject higher taxes in 2003 budget
New York State should restrain state spending and reject higher taxes in crafting a 2003 state budget in challenging fiscal circumstances, The Business Council has advised Governor George Pataki.
Noting that tax cuts and spending restraint in the mid-1990s helped reverse historic job losses of the early 1990s, Business Council President Daniel B. Walsh's Dec. 23 letter to Governor Pataki said lawmakers should keep this progress in mind in shaping the state budget.
"Recognizing how far we've come is especially important because of its implications for where we go from here," Walsh wrote.
Walsh cited a new analysis by The Public Policy Institute showing New York's "tax gap" - the difference between New York's state and local tax burden and the national average - at its lowest point since the 1970s. "Measured as the proportion of personal income, in fact, our extra tax burden is smaller then it has three decades," the letter said.
"To be sure, taxes are still high in New York -- particularly local taxes," the letter said. "But it's important for New Yorkers to recognize the truly historic change that has occurred in Albany. We've been doing our best to call attention to that fact, and will continue to do so."
The letter urged Governor Pataki to make a strong case for spending restraint across the board "so that we can only avoid tax increases to keep moving forward and cutting the cost of government."
The letter also urged Governor Pataki to:
calls for higher taxes from public-employee unions and other
spending interests and instead allow tax cuts scheduled
to take effect next year to proceed. Tax cuts scheduled
to take effect this year would encourage investment in New
York by securities, insurance, and banking companies, and
provide tax relief to the working poor, families with students
in college, and married couples in which both husband and
wife work, the letter noted. "Clearly, each of these is
important and should go forward as scheduled," the letter
that state tax policy enhances the investment effects of
any federal reforms. It has been reported, for example,
that the Bush administration may seek new tax reforms to
stimulate economic growth, perhaps building on depreciation-related
incentives that took effect last year. New York should reject
any calls to decouple state tax policy from federal tax
policy in any way that eeduces the benefit of such a proposal
to New York, the letter said.
New York State corporate tax policy by enacting the so-called
single-factor sales apportionment method for corporate taxes.
This reform would base New York's corporate taxes solely
on in-state sales. Now, corporations use three factors to
calculate state taxes: in-state payroll, in-state property
value, and in-state sales. This has the effect of inflating
state taxes for companies that put new jobs within the state.
so-called "targeted tax increases," which often produce
far less revenue than expected and which "can have harmful,
and unpredictable, effects on our economy," the letter said.
state spending, especially in relatively new programs for
which revenue streams expected to support the spending are
now uncertain. For example, the Health Care Reform Act of
2002(HCRA) dramatically increased state spending on health
care with funding that is now "uncertain, at best," the
letter said. "If the funding is not available for those
programs, they cannot go forward until other revenue appears,"
the letter said.
local governments in school districts to reduce costs of
runaway lawsuits. Lawsuits cost localities and school districts
hundreds of millions of dollars a year. The state has no
such problem. Lawsuits against the state are heard by the
state Court of Claims, which uses established precedents
and a non-jury process to set awards. "Municipalities should
be given access to a similar process," the letter said.
over the local share of Medicaid costs over three to five
years, which could save hundreds of million dollars a year
just in consolidated administrative costs. This state takeover
of Medicaid should be coupled with an ironclad requirement
that localities returned every dollars saved to their taxpayers.
and expand the state's commitment to strengthening research
education spending where it is most needed and where will
be most effective in terms of raising performance.
state incentives to help New York's cities attract in-place