Why is New York State Broke? A Viscous Cycle that must be Broken

What do Presidents Reagan, Kennedy, and Coolidge have in common? They all recognized that if government reduced its role in the economy, America’s businesses would flourish and the resulting economic growth would benefit everyone, including the government’s coffers. In 1963, President Kennedy stated,

"Lower rates of taxation will stimulate economic activity and so raise the levels of personal and corporate income as to yield within a few years an increased – not a reduced – flow of revenues to the federal government."

In fact this is precisely what happens when government gets out of the way and allows individuals and private businesses to keep more of their own money to spend and invest as they see fit. All three Presidents experienced very healthy increases in tax revenue at the same time as they drastically cut tax rates.

When New York State increases income tax rates and/or local governments increase property tax rates in order to make up for yet another budget shortfall they simply exasperate the problem that caused the deficit in the first place. As taxes rise, individuals and businesses leave the state resulting in fewer tax payers. This is what has happened in the Empire State. New York has had a net migratory loss of over three million people in the last twenty years. To put that in perspective, it is equivalent to Clinton and Franklin counties losing their entire population every single year over and over again. They took with them tens of billions of dollars in assets and income which New York State lawmakers cannot ever again tax nor will be spent at a local restaurant nor invested in a new home or business in your community. To no one’s surprise, the primary reason given for leaving is “high taxes.”

It is time that New York State and its local taxing authorities recognize that the solution to budget deficits is not higher tax rates or new taxes as they will simply have the effect of further worsening the problem by dampening economic growth which will in turn further reduce tax revenues along with increase government spending as more unemployed will be seeking government aid … the inevitable “double whammy.”

It is crucial that New York lawmakers start getting it right and put an end to this cycle of increased taxes which only lead to further deficits. They must reduce the tax burden on individuals and businesses and do away with regulations that increase the cost of living and make it difficult for businesses to remain competitive in a global economy. They must make a concerted effort to deal with the inefficiencies built into health care, education, energy regulation, etc. This is quite an ambitious undertaking and could only be addressed by lawmakers who have the energy, will and intellectual aptitude to take on “the bureaucracy” and “the system.” Few believe that this can be accomplished with the current crop of career politicians.

Why is New York State Closing Parks and Prisons?

While it is true that the Governor has inherited a fiscal mess and a state bureaucracy that has been bloated since the days of Rockefeller, Gov. Paterson is unfortunately perpetuating this (more) taxes and (more) spending approach that has driven thousands of businesses and more than 3 million residents (since 1990) - along with their $billions in annual income and tens of $billions in assets - out of NYS and thus shrinking the tax base. And those of us still here are paying more for less. This shrinking economic pie will result in ever more cuts made in the wrong places like closing parks, correctional facilities, fewer teachers in the classroom etc. ... that is, areas where there is a direct negative consequence on New Yorkers quality of life, education and economic competitiveness.

At the same time, the state continues its wasteful spending on the administrative bureaucracy in Albany (and elsewhere) as well as building projects - whose costs are astronomical. Case in point: Why does it cost Saranac Central School $17.5 million “to replace building windows, lights, boilers in the heating system and water heaters, as well as buying interactive white boards and improving playgrounds and playing fields” (PRB Editorial; 2/15/10) when the private sector can build a 50,000 square foot four story office building (from the ground up) for half the cost?

Why does it cost the new Catherine Gardens Senior Housing Center in Plattsburgh more than $258,000 per (mostly) one and two bedroom apartments units?

Is it due to the fact that private businesses have to EARN their income while politicians/bureaucrats can simply TAX/CONFISCATE (by force if necessary) the people’s income and wealth.

The only way we can reverse this distressing NY state of affairs is for the voters to demand accountability from their politicians (at all levels of government) and return NYS to the free market principles our industrial base and economic prosperity was founded upon.