With
his 2004 budget announcement, County Executive Jack Doyle showed even a lame
duck can spin like a top.
           Consider his proposal to increase
the sales tax in Monroe County by 0.6 percent, making the full rate rise from
8.25 percent to 8.85 percent. Doyle characterized this increase, designed to
erase almost $42 million of a $52 million deficit, as “six-tenths of a
penny.” Here penny surely is
meant to convey one dictionary sense of the word: “a trivial sum.”
But it drapes a political veil over the truth: Doyle is asking for a 15 percent increase in the 4-cent
local component of the sales tax.
           Imagine the reaction if Doyle had
proposed hiking the county property tax by a similar percentage. (In fact, in
his announcement, he warned that without the sales-tax increase, “we could
be talking about a job-killing, more-than-20-percent property-tax
increase.”)
That’s not the
end of the spinning, though.
           After commenting that items like
library services afford no more opportunities for cuts, and maintaining that a
property-tax hike would be “irresponsible,” Doyle said a sales-tax
increase is simply “unavoidable.”
           Which may be true in a purely
political sense, but not otherwise.
           Some counties in New York State
demonstrate that there is another option. And state taxpayers, wherever they
live, see evidence of it on their tax forms.
            The option is a local income tax. Right now, only New York City
and Yonkers use this tax, which can add a few percent to a person’s or a
couple’s tax liability. (Of course, these two jurisdictions have around 40 percent
of the total state population, so the practice is hardly marginal.) Yonkers has
a “commuter tax,” by which non-residents who work there pay some
income tax to the municipality.
           New York City no longer has a
commuter tax, though it almost made a comeback during New York City’s recent
fiscal crisis. Ultimately, Mayor Michael Bloomberg used an income-tax hike,
among other things, to help close his city’s huge budget gap. The hike, said
the New York Times this past July,
will affect only the highest-earning 5 percent of city taxpayers. The city also
enacted a sales-tax increase of 0.125 percent — obviously much less of a hike
than up here in Monroe County.
           There’s a parochial tendency to say:
Well, New York City is remote from our experience, practically another planet.
Not true. But some people quite close to Rochester are discussing an income tax
to deal with the kind of deficit that plagues every corner of the state.
           Earlier this month, Tim Joseph,
chair of the Tompkins County Legislature, unveiled a plan for a new county
income tax. Joseph suggested a 10 percent surcharge “piggybacked” on
a filer’s state income tax payment.
           How did the proposal fly? Mainline
opinion can be gauged from an October 21 editorial in the Ithaca Journal: The proposal, said the editorial, has “strong
appeal” because of its fairness, but it might have a negative impact on
local workers and entrepreneurs and thus “is not a good fit for Tompkins
County.”
           “I’m getting mixed
feedback,” Joseph admits. In his capacity as chair of the Lej, Joseph sits
on the board of the Chamber of Commerce; C of C members, he says, weren’t as
negative about the idea as he expected.
           The proposal has outright fans, of
course, and Joseph sounds convinced of its plain good sense. For one thing,
there’s the cash flow. He estimates the 10 percent surcharge would bring in
around $6 million, taking much pressure off the budget. And a 50 percent
surcharge, he says, would bring in enough to eliminate the county property tax
entirely. (That big a political item is not on the agenda, though.)
           On one particular, Joseph sounds a
little like Jack Doyle: He says Tompkins County’s problems are grounded in
mandates. But he tracks other relevant trends. “It’s the second year in a
row of a big shift” of the tax burden onto localities, he says. He notes that
state and federal income taxes have been flattened in recent years, making the
pressure on localities even greater.
           “I see it as a direct transfer
from the income tax to the property tax, a transfer from the wealthiest people
to the middle class,” he says.
Some might say: Pick your
poison. When it comes to taxes, how much difference can there be between one
type and another?
           It can make a huge difference,
depending on where you sit on the economic ladder. In the classic formulation,
consumption taxes are the most regressive kind, and graduated income taxes are
the most progressive. But what’s beyond the abstractions?
           Matthew Gardner, a University of
Rochester alum who’s now an analyst with the Washington-based Institute on
Taxation and Economic Policy, has detailed the tax burden across the income
scale. Looking only at “non-elderly taxpayers,” Gardner’s study
includes the taxes people pay directly and those they pay indirectly — as
with business taxes that are “hidden” in commodity prices.
           Using data for 2000-2002, a chart
Gardner prepared says New Yorkers in the bottom quintile (average annual income
$8,700) spend 9.5 percent of their income on sales and excise taxes. These
taxpayers on average spend only 4.4 percent of their income on property taxes,
often by way of their rent. But this group actually makes a little more than 1
percent back on income taxes, via earned income credits.
           According to Gardner’s data, the
entire bottom 80 percent of taxpayers
in the state pay more percentage-wise in sales and excise taxes than they do in
property or income taxes. The break point is income of $74,000, beyond which
the sales tax starts looking much better in relative terms. At the very top,
there’s no contest: Those making $634,000 or more — the group average is an
income of $1.6 million — pay 1.2 percent in sales and excise taxes, 1.6
percent in property taxes, and 6.3 percent in income taxes.
           These numbers have to be put in
context: People with the highest incomes naturally pay more in dollars, as opposed to percentages, than
those at the bottom. And certain taxes are more “optional” than
others; you can simply avoid buying many taxable items, for example. Still,
looking at the numbers, it’s clear a shift to the income tax would benefit the
vast majority.
           And yes, a 0.6 percent sales-tax
hike would obviously add more than a few bucks to the price of a Ferrari. But
how big a hit would the financially distressed take?
           Frank Mauro, head of the
Albany-based Fiscal Policy Institute, crunched some of Gardner’s numbers a
little further. He took Jack Doyle’s proposed sales-tax increase of 0.6 percent
and calculated its likely current effect on households here. A typical household
with an income of $20,700 — that’s the second quintile from the bottom —
would see its direct layout for general sales tax going from $773 to $830 per
year, he found.
           That may not sound like a lot —
unless you’re one of the multitude who struggle to make ends meet on a
near-poverty income, and who may soon be enlisted to fix the county budget
deficit through more sales-tax “contributions.”
This article appears in Oct 29 – Nov 4, 2003.
