For Release — May 26, 2010
Business Council says New York cannot borrow and tax its way out of budget crisis
ALBANY— “As the state's budget stalemate continues, New Yorkers should be wary of proposals being floated to borrow or raise taxes to end this fiscal crisis. These proposals would simply continue business as usual in Albany and lead us to another crisis next year,” said Kenneth Adams, president and CEO of The Business Council of New York State, Inc.
“Average New Yorkers understand what must be done: reduce state spending and cut the cost of government. For at least a decade Albany has spent more than New York taxpayers can afford. Now that must stop,” added Adams.
The Business Council points out that New York's budget would be $18.5 billion lower if state spending had simply kept pace with the rate of inflation since 1999.
“If Albany had spent at sustainable levels there would be no crisis. Raising taxes or borrowing to keep spending at levels New Yorkers cannot afford just means bigger deficits in the future,” said Adams.
The Business Council also notes that state debt has grown by about 25 percent in the past five years. Much of that new debt has been to refinance old operating deficits of New York State and New York City. Comptroller Thomas P. DiNapoli's analysis of the current borrowing plans shows they would cost New York taxpayers $850 million per year in new debt service.
“Every person knows you can't keep putting every day expenses on a credit card. Borrowing for operating expenses will only make the problem worse,” said Adams.
Proposals to increase taxes, especially on the financial services industry and its employees are also dangerous. As pointed out in a recent report by The Public Policy Institute, the research affiliate of The Business Council, financial services is New York's economic engine.
The industry and its employees pay 20.3 percent of the state's tax revenues. And since 2007 taxes on this sector and its employees have increased $3.8 billion.
More than 500,000 people work directly for the sector in New York and the report estimates more than 1.6 million New Yorkers are dependent on the industry to support their jobs.
While many of these workers are concentrated in New York City, the four other counties with the highest concentration of financial services workers are Nassau, Erie, Suffolk and Westchester -- demonstrating the industry's importance across the state.
“Albany increased the tax on higher income brackets last year and it's not producing the revenue expected. New York City residents in the higher brackets will be paying more than half of their income in taxes next year. Trying to raise those taxes again will simply drive more economic activity out of New York and make our fiscal crisis worse. The only real solution is to rein in spending,” concluded Adams.