Pataki's Class Bias

Guv Seeks Sacrifice From Average New Yorkers, Protects High-End Friends

A year and a half after 9-11, with the state and city facing catastrophic deficits, all that matters to the New York Post's governor is protecting the rich from a temporary tax surcharge. That is the state's only current economic policy, as dictated by the only editorial page that matters to a governor auditioning for a Bush future.

Posing in camouflage compassion in last year's re-election campaign, George Pataki can now govern for a kangaroo constituency of one, Rupert Murdoch, whose newspaper rails daily about supposed tax traitor and senate GOP leader Joe Bruno. A Post icon forever, Bruno dared to suggest that he and Assembly Speaker Shelly Silver might just do a $2 billion PIT (personal income tax) hike to reverse Pataki's savage slashing of school and health aid, provoking sudden threats of an Australian coup on American soil.

So, as the legislature reconvened Monday, the governor, having already targeted average New Yorkers with proposed hikes in transit fares and college tuition as well as clothing and tire taxes, suggested that he'd prefer a sales-tax boost for all to a higher PIT for six-figure earners. The Post simultaneously carried op-ed wisdom from Steve Kagann, the governor's chief economist, who, for the first time, abandoned explicit opposition to increases in any broad-based, "job-killing" tax. Invoking "the unemployed who lost their jobs under the weight of 9/11," Kagann assailed PIT increases exclusively, calling them "especially dangerous and damaging" and implicitly opening the door to a wink-and-nod hike in the 4 percent state sales tax (the other 4 percent is local).

As logical as it might be to think that, in a troubled time partially prompted by terrorist attack, wealthy elites would be the ones called on to make temporary and insignificant sacrifices, such suggestions are, in Pataki's and the Post's world, treason. PIT and WMD are interchangeable causes for a declaration of war. If there is a statue of Joe Bruno in his home Rensselaer County, Fox is ready to film its downfall. How Bruno failed to understand that the 9-11 burden belongs to the soon-to-be-laid-off hospital workers and classroom paraprofessionals—or anyone who shops—is beyond the real-world tabloid economists who advise our wily governor.

The Institute on Taxation and Economic Policy found that New Yorkers who earn less than $15,000—our bottom quintile—spend 9.5 percent of their income paying state sales and excise taxes, while those who make over $634,000—our top 1 percent—spend only 1.2 percent of their income on such taxes. The institute's chart is so symmetrical that it clearly shows the state's sales taxes are "inversely related to income" across all levels.The state's PIT, on the other hand, takes nothing from those in the bottom quintile, moving up the ladder to 6 percent for those earning over $634,000, just as symmetrically.

So if, after an economy-flattening air attack, you were the governor and had to choose between these taxes, wouldn't you, too, embrace the obvious advantage for all New Yorkers of protecting the trickle-down wealth of high earners?

Two Manhattan assemblymen, Steve Sanders and Pete Grannis, told the Voice that the governor actually raised the possibility of a sales tax increase in a conversation last week with legislative leaders. Silver told his Democratic conference on Friday that Pataki interjected it. "The governor asked, How about a sales tax?" Grannis recounted. "But when pressed if that's what he was proposing, the governor said, 'No, I'm not proposing any taxes.' " Sanders said much the same thing: "The governor was sending signals late in the week that he was not opposed to an increase in the sales tax."

Grannis and Sanders agreed that there was "no support for a sales tax increase in the conference," but Grannis noted that it "could provide cover for Republicans in the senate." The "only appeal" of the sales tax hike, said Grannis, was that the legislature "could get the budget restorations without having to worry about overriding a veto." Bruno and Silver have suggested in recent days that their two majorities were prepared to override likely Pataki vetoes of budget bills, from the restorations to any PIT hike.

Brooklyn assemblyman Jim Brennan said, "The ball is now in the senate's court," noting that Bruno will "either stick with the assembly on the tentative agreement we had to do the income tax surcharge" or go with Pataki on a sales hike. "Bruno has the same problem with a sales hike that we do," said Brennan, namely that "the voters will be reminded every time they make a purchase" that the legislature added this to their bill. But if Bruno switches, Brennan said, "the assembly will have to come back to discuss it." Faced with a choice between a sales increase or no restorations, assembly Democrats will almost undoubtedly adopt a hike they overwhelmingly oppose.

As the Voice closed on Monday, it was still unclear where this latest trial balloon will land. But it is clear that Pataki will veto a two- or three-year PIT increase on incomes over $100,000 or $200,000—two of the proposals floating around Albany—even as he ends pre-K and after-school funding as well as narrowing the eligibility for one of his much ballyhooed health insurance programs.

It doesn't matter that state income taxes, but not sales taxes, are deductible on federal returns, meaning that more than a third of any state PIT hike would be compensated for by lower federal tax payments. It doesn't matter that New York State has cut its top personal tax rate by more than 50 percent over the last 25 years, going from the third highest rate to 19th out of the 42 states with income taxes. Nor does it matter that New York has the widest income disparity in America, getting wider by the minute, and that a Nobel Prize-winning economist, Joseph Stiglitz, recently found that a high-income targeted PIT hike was the least damaging mechanism for balancing state budgets during recessions.

Pataki is oblivious to the fact that high-income taxpayers hit by a New York surcharge would still not be paying more in total taxes because they'd be benefiting from the disproportionate Bush tax cut at the same time. He's also oblivious to the 14 percent of New York income taxes that are paid by nonresidents, or the recent actions of Connecticut GOP governor John Rowland, who proposed a surcharge on millionaires and wound up closing half his budget gap with new taxes. He doesn't even care that 71 percent of New Yorkers polled by Quinnipiac favored resolving the budget crisis with "temporary tax increases on the wealthy."

What does matter to the governor, according to every armchair observer of him in Albany, is his Washington fantasy. He imagines himself as president one day, getting there perhaps as Homeland Security successor to Tom Ridge, another Northeast Republican governor, in a second Bush term. To secure a prominent place in Bush's worldview, or even just within the national party, he must lead this anti-income-tax crusade and burnish his Murdoch credentials, just as he recently led a ground zero pro-war rally. He may even fight the closing of corporate tax loopholes agreed to by the senate and assembly, though New York, Louisiana, and Kentucky are the only states that have all three of the classic and costly loopholes identified in a recent study by the Center on Budget and Policy Priorities.

He told the ground zero rally that the Iraq war "started right here," a blood lie more fraudulent than his campaign's fiscal cover-up. His MTA, according to State Comptroller Alan Hevesi, deliberately fudged its finances to postpone a fare increase until after his re-election. And now, in what he says is the worst economic crisis in New York since the Great Depression, his "job-killing tax" rhetoric has become his cruelest deception, safeguarding selfishness even at the expense of lives just begun.

Research assistance: Cathy Bussewitz, Alexa Hinton, Felicia Mello, and Solana Pyne

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