Sunday, February 10, 2008

GOV SPITZER UPDATE Pt. II: The Budget; Taxing Crack and Other Crazy Ideas


Gov. Eliot Spitzer's 2008 budget is a pipe dream, in too many ways to count. The craziest idea in his '08 budget proposal is the so-called "crack tax," which would tax people caught selling illegal drugs. Spitzer wants to sell "tax stamps" to illegal drug dealers, with the promise that NY State tax authorities will not alert law enforcement. The counterpoint to this is that every person convicted of selling illegal drugs in NYS without a "tax stamp" on his packaging will be liable for the taxes, penalties, and interest to the State of NY (as if they will get any revenue from this). Read about it here and here.



Another bad idea that Gov. Spitzer floated was selling future lottery revenues for a short-term revenue boost, to a private contractor. I'm not the only one who thinks this is a crazy idea (link):




The possible sale was also blasted by the Manhattan Institute's E.J. McMahon, who said it could turn out to be "the mother of all one-shot revenues.



"No matter how you slice it, if you borrow money from a future revenue stream in the lottery to pay current expenses, you're creating problems for New Yorkers in the future," McMahon said. (NY Post)




He's also trying to revive the "grinch tax" on internet sales. This idea was killed before it was officially proposed, just before the Christmas shopping season. See my LEAVWORLD post about this crazy idea, for the details.



This only scratches the surface. Gov. Spitzer is "doubling up" on the excessive spending by the state, even drawing criticism from fellow Dems:




January 28, 2008 -- ALBANY - State government overtime pay jumped 10.1 percent last year - costing taxpayers $481.6 million - even as the number of workers on the state payroll reached its highest level since Mario Cuomo was governor.



"I think we're spending much too much and we have to look at ways to sort of attrition our expenses," Senate Democratic Minority Leader Malcolm Smith told reporters after addressing a statewide group of county officials.




NY State has one of the largest public-sector worforces in the nation. In a iberal's mind, the more the state spends on labor, the more tax revenue it generates. Spitzer seems to be on board with this train of thought, as cited in the NY Post (link):




Last year's bill for overtime was even higher than what the state paid out in the aftermath of the 9/11 attacks, according to figures compiled for The Post by the state Comptroller's Office.




Gov. Spitzer has found ways to save money, though. He has ended fingerprinting food-stamp recipients (link), cut funding for an office that conducts criminal background checks on prospective teachers (link), and compounded a previously broken promise of millions is school funding to NYC, much to Mayor Bloomberg's chagrin (link):




Bloomberg was equally emphatic that the city deserves its full share of revenue-sharing aid instead of the half that Spitzer has proposed.



During last year's budget negotiations, the state eliminated all but $20 million of the nearly $330 million in special aid to the city with a promise that the entire amount would be restored in the coming fiscal year.



But Spitzer proposed just $164 million in 2008-09 with a vow that the rest would be restored in 2009-10.



"It seems like a recurring theme," Bloomberg said of the promise of more aid for the city in future years.




There is something underliying this whole budget story. Something not mentioned yet, and that is what the NY State budget is dependent on: the NYS taxpayer. Here's another NY Post excerp (link):




The Spitzer administration, which only months ago expected bonuses to grow by 14 percent, now projects that they fell by a hefty 5.5 percent...



The declines are significant for New York state, where Wall Street taxes make up a whopping 20 percent of total state tax revenue.




In other words, "taxing the rich" is going to get alot less lucrative for the NYS pols in the immediate future. Where will they turn next? More regressive cigarette taxes and Lotto games (and other gambling revenue)? I'll tackle that in a later post, but Gov. Spitzer seems to be going in that direction.



Long before Gov. Spitzer, NYS has increased spending on pensions and health benefits that state workers contribute little or nothing to, while private sector businesses have had to make their employees share in the cost of this benefit, if they can even afford to offer it. My hope was that Gov. Spitzer could take on the public-sector unions, to control profligate state spending. He has largely failed.



In our Governor's defense, he has been praised by E.J. McMahon, in the NY Post:




Annoying a powerful ally - and embracing a concept he had rejected during the 2006 gubernatorial campaign - Spitzer said he would form a special commission to recommend a "fair and effective cap" on school taxes in New York




Politics can be dirty business, and political commenting can be even dirtier. I'm attacking Governor Spitzer as a huge disappointment on fiscal matters, in addition to his possible personal ethical lapses (see spygate link). I will tie these points together in the third post of this update, regarding his venomous personality, which seems to be the source of all his problems. There will be more than three parts to this update on Gov. Spitzer's latest escapades.

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