Cutting spending and making government more productive could save New York City from the economic damage that would inevitably result from proposed tax increases, according to former Governor Hugh L. Carey and other business and civic leaders.
"A strategy of trying to tax your way out of hard times has been tried twice before -- in the late 1960s and early 1990s -- with disastrous consequences," the group wrote. "Now, as then, tax increases will not only not solve the budget crisis but will exacerbate the economic downturn."
The article in the May 9 Wall Street Journal was signed by Governor Carey and two other leaders in New York's mid-1970s recovery -- Walter B. Wriston, former CEO of Citibank; and Felix G. Rohatyn, former chairman of the Municipal Assistance Corp. Also signing the article were Richard Gilder, co-chairman of the Club for Growth; H. Dale Hemmerdinger, CEO of Atco Properties; and Roger Hertog, chairman of the Manhattan Institute.
"When taxes are already as high as they are in New York, new or increased levies fail to generate the level of revenues that city officials project," because higher taxes reduce economic activity, the leaders wrote. "Long-term, the damage to the city's economy could be profound."
Over the last four decades, as New York City has been "the most heavily taxed city in America," private-sector employment has been stagnant while the local-government payroll has grown by 90,000 positions, or more than 20 percent.
Governor Carey and the other leaders said major corporations will be hit "especially hard" by the major property-tax increase city leaders enacted in 2002.
"Fifty years ago, New York was home to 140 Fortune 500 companies," they wrote. "Today that number is down to 33."
The leaders said the likely damage from higher taxes is especially "troubling" because it is unnecessary.
"There is enormous room to cut the city's budget without severely damaging services or laying off crucial workers," they wrote.
For instance, City Hall has done little to reduce its huge payroll costs, the leaders said: "It is proceeding as if the private economy existed solely to preserve as many government jobs as possible, and as if 100 layoffs in the private sector economy were preferable to the layoff of a single government worker."
City leaders have also failed to explore potential cost savings from privatizing services and requiring more productivity from public employees, they said.
Governor Carey and the other civic leaders suggested an immediate, two-year freeze on city hiring, wages and benefits as part of a broad package of long-range cost reductions.
"The goal should be a government that provides basic services at reasonable tax rates, but that does not heap unnecessary costs on businesses or residents," they said.