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New York needs economic progressivism, not pandering to the rich

Rochester Business Journal
April 17, 2009
Health care costs are an ever-growing piece of the state budget, and health care finance cries out for reform. Sadly, for some people "reform" means mainly cutting health care dollars from the budget, and that reform that will only make the problem worse.

With this is mind, the Business and Labor Coalition of New York, known as BALCONY, has planned a Rochester Area Health Care Forum from 8 to 11:30 a.m. May 1 at the Colgate Rochester Crozer Divinity School, 1100 S. Goodman St. The event is intended to find common ground between business and labor on practical ways for improving New York's health care system.

The forum will begin with a presentation by the Finger Lakes Health Systems Agency on the health status of the Rochester area and an overview from BALCONY of statewide reform proposals. This will be followed by comments from a panel of government, business and labor leaders, including Assemblyman Joseph Morelle, chairman of the Insurance Committee; Michael Elmendorf, New York director of the National Federation of Independent Business; and me. The audience will have an opportunity for dialogue with panelists.

BALCONY engages in grassroots campaigns to bring about a health care system that gives everyone access to high-quality, affordable care. Its Rochester-area partners in organizing the forum are the American Cancer Society, FLHSA, Local 86 of the International Brotherhood of Electrical Workers, New York State United Teachers and the Rochester & Genesee Valley Area Labor Federation, AFL-CIO. For additional information and registration, go to

As New Yorkers, we must continue to deal with one of the worst economic periods in our state's history. While most people think the state budget process is over, labor will keep working on unfinished business related to the state budget.

Labor is pushing to reform unemployment benefits, which now top out at $405 per week, 26th among the states. With unemployment rising weekly, this benefit should be at least 50 percent of the average weekly wage and indexed to inflation. As layoffs and the recession send consumer demand spiraling downward, the only way to stop it is to get money into the hands of consumers. Until job losses can be turned around, every dollar in unemployment benefits generates about $1.64 in economic activity.

We also will continue to fight the proposed layoffs of 8,900 state employees, which are projected to save $490 million over two years. Contractors receiving six-figure salaries continue to work for the state at a cost of $750 million a year, often working side by side with state workers and doing the same jobs.

Though federal stimulus funds have mitigated some of the cuts in education and health care, state budget cuts will cause further job loss and will force regressive property taxes higher to maintain services.

We also need to fix our broken industrial development agencies. In the time since the old law expired we have seen local tax subsidies go to well-connected campaign contributors for retail expansion. These subsidies may change where people shop for shoes and shirts, but there is no evidence that they increase the quantities of shirts and shoes purchased and thus no evidence that they increase employment, particularly in middle-class jobs.

As it stands today, IDAs do not have to meet any standards and too often subsidize jobs at poverty wages. Taxpayers' money should be used only for high-end economic development that has real wage standards in construction and creates good, permanent jobs. The state comptroller has reported that these tax abatements for employers through IDAs exceed $600 million annually. That money could be better used to lower property taxes and fund real economic development.

Lastly, and maybe most importantly, labor supports permanent, progressive tax reform. The personal income tax reform passed recently is a three-year, stopgap measure that does not address the long-term need for restructuring.

Organized business and the millionaires had pushed the state income tax down from a top rate of 17 percent to less than 7 percent. The top tax rate had kicked in for singles at $20,000 and for married New Yorkers at $40,000, the same rate paid by millionaires. This transferred the burden of funding education and services to regressive taxes on the middle class, small businesses and the poor.

When one adds property taxes, sales taxes, fees and other consumer taxes at the point of sale, middle-class New Yorkers and the poor have paid 10 percent to 12.5 percent of their incomes to the state while the rich paid less than 7 percent. And it is these regressive taxes that are hurting small and midsize businesses, not personal income taxes. When local governments reassess my home or a business to increase property taxes, taxes have increased without an income increase.

It is irrelevant when the apologists of big business claim that the top 25 percent of earners pay 96 percent of New York's personal income taxes already, since only 5 percent of New Yorkers make more than $250,000 per year. The top 25 percent includes a large slice of the middle class. Additionally, only 2 percent of our small businesses generated personal taxable income for the owner of $250,000 or more. A progressive income tax, not a flat tax or regressive taxes, helped build the middle class.

The interesting thing is that the top marginal rate of federal income tax for the wealthiest Americans was 63 percent to 79 percent during the New Deal and was about 90 percent through eight years of the Republican Eisenhower administration, slowly dropping to 70 percent for most of the Nixon administration.

The United States has the worst disparity of wealth in the industrialized free world, with the top 10 percent having 50 percent of the country's wealth. New York has the worst disparity of wealth among the 50 states. In addition, estimates from Gov. David Paterson's executive budget indicate that all income growth in New York from 2002 to 2009 went to the wealthiest 5 percent of New Yorkers.

The solution is obvious: a truly progressive tax system. When I think of the hundreds of billions in taxpayer bailouts going to the big boys on Wall Street, in banking and insurance, I wonder whether the net of their taxes paid during 2008 and 2009 will actually be less than zero.

By the way, claims that high earners would leave the state when a three-year increase was enacted over Gov. George Pataki's veto for 2003-05 were proved false. According to the state Department of Taxation and Finance, 300,815 taxpayers earned $200,000 or more in 2002 and that grew to 395,952 by 2005. The same claim also has been proved wrong in New Jersey, where Gov. Jon Corzine pushed through an increase in tax rates on high incomes several years ago.

Though the temporary change in New York's personal income tax is at least a move in the right direction, the final budget is a huge disappointment, coming from a Democratic Legislature. Increases of taxes on middle-class and poor families of about $2,000 per year, emphasis on cutting deficits during the largest economic downturn since the 1930s, cuts in education, health care and state services causing layoffs, and IDA tax subsidies without middle-class wage standards are the anti-stimulus package to President Barack Obama's stimulus package.

This is not just my assessment; it's what the governor's budget was called by Prince-ton economics professor, New York Times columnist and Nobel laureate Paul Krugman. Another New York Nobel laureate in economics, Joseph Stiglitz of Columbia University, also has stated that in an economic crisis, steep budget cuts hurt more than high-end tax increases. Stiglitz has called for a progressive income tax restructuring to move the funding of services and education away from regressive property taxes.

Our Democratic governor and many Democratic legislators have compared President Obama to Franklin D. Roosevelt as a transformative figure at a time when we need another New Deal. Though, like me, they are too young to have heard FDR's fireside chats, one can read them. FDR asserted that there is "an individual right to health care, adequate shelter, food and decent wages." He called for a new bill of rights that includes education, recreation and universal access to good health care. He also equated the "normalcy" of the roaring 1920s with "the spirit of fascism," a clear reference to the excesses of the rich during the end decade of the Gilded Age, which many call the era of the robber barons.

These same state Democrats now in large measure have embraced the agenda of the past 30 years of the Chamber of Commerce and its subordinate groups by replacing a progressive income tax with regressive taxes on workers and the poor, deregulating the insurance and financial industries and deregulating trade in a race to the bottom that has destroyed jobs and our manufacturing base.

This is the 12th year I have tried to express organized labor's views on these and other issues in this monthly column. Review those labor positions objectively alongside the positions of organized business, and look where our economy is today. For the most part it is the business agenda that has been forced on the rest of us. Then tell me who is advocating for America and Americans, big business or labor? You be the judge.

James Bertolone is president of the Rochester Labor Council, AFL-CIO. He also is president of the American Postal Workers Union Local 215.

04/17/2009 (C) Rochester Business Journal

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