(October 18, 2007)
Governor Spitzer's budget director sends business mixed signals on taxes in next year's budget
Governor Eliot Spitzer's budget director Thursday sent New York's business community mixed signals about the prospect of a heavier tax burden next year.
"Governor Spitzer has been very clear that he does not intend to raise taxes," Paul Francis, director of the state Division of the Budget, said in response to a reporter's question during a presentation at the Rockefeller Institute in Albany.
Later, in response to the same question, Francis said the Spitzer administration expects to propose "closing corporate loopholes."
"We will continue to look at the tax code," Francis said. "It's almost a duty of a chief financial officer to take advantage of tax planning to reduce tax liability. But it's not understood by the state how little tax many of the largest corporations in the state pay. There is an issue of fairness."
Addressing a question about the possible movement of financial-sector jobs beyond the state borders, Francis also downplayed the importance of taxes as a factor in attracting job growth in this sector.
"What I don't believe is the case is that our taxes are a big disincentive [for New York City's financial services sector]," he said. "Our taxes and our costs of living are very competitive."
Francis also said that "it is likely" that the Division of the Budget will project a larger budget gap than it did in its first-quarter update. He blamed struggles in the real estate sector and, in particular, on Wall Street, which Francis said generates about 20 percent of the state's revenues.
Earlier this year, Governor Spitzer proposed a series of "loophole closings" that The Business Council characterized as tax increases and strongly opposed because they would increase the tax burden on business.
In the budget that was approved, some but not all of the Governor's proposed "loophole closings" were enacted. That budget also included a reduction in the overall business tax rate, which The Business Council strongly praised.
In reviewing the Spitzer administration's hopes for the 2008-2009 budget process, Francis said the Spitzer administration's focus will be on "consolidating gains" from last year's budget and budget process. For example:
- The administration last year reduced the rate of growth
in Medicaid spending, and hopes to both sustain that trend
and continuing changing the focus of state health-care
spending from subsidies for institutions to spending that
directly benefits patients, Francis said.
- He repeated the Spitzer administration's commitment
to increasing spending on, and expanding eligibility for,
the State Children's Health Insurance Program (SCHIP),
taxpayer-funded health insurance program for children.
- The Spitzer administration will continue emphasizing
more accountability measures accompanying state aid to
schools and more "progressive" property-tax
relief measures, Francis said.
- In pursuit of a more timely and efficient budget process,
the Spitzer administration has begun key steps in the
process earlier this year. Francis said that various public
budget hearings on different agencies' budget needs and
issues will take place this month and in November, and
that the Legislature, the state Comptroller's Office,
and the Division of the Budget hope to issue a joint report
later this year on projected revenues and major disbursements.
"The significance of that is that there should be
consensus on the gap that the state will face in 2008
very early in the process," Francis said.
- Francis said that the Spitzer administration would use
growth in personal income, as opposed to the more traditional
measurement, the rate of inflation, as a benchmark for
increasing spending in the state budget. He said this
year's rate of growth in personal income in New York State
would be about 5.3 percent.
- He also said that the Spitzer administration recognizes "the need to balance the endless needs that government faces with the ability of taxpayers to support the tax burden and the ability of corporations to remain competitive in New York State." He said the administration would continue its emphasis on spending that is "efficient, fair, and targeted."