The Streets Were Paved with Gold - Ken Auletta [41]
It was also to prove very expensive. Rockefeller said it would cost the state only “$90 million,” and on May 22, 1966, he declared it would “save money for New York City.” By 1977, over 2 million state residents received Medicaid benefits, 70 percent of them residing in New York City. Even after tightening eligibility standards, the city, which was to “save” money, spent $573.7 million for Medicaid in fiscal 1979—more than it expends on welfare. When counting the state’s share, the city cost is over $1 billion. If we count the cost to the federal, state and all local governments in New York, the cost is $3 billion.
Taxes
Time-Life Books closed its Rockefeller Center offices on October 1, 1976, and said goodbye to New York. The company, employing 312 people, spent $2 million to move to Alexandria, Virginia. Despite this expense, company officials estimated that they would save a total of $4 million in reduced taxes and space rental costs in the first year alone. In contrast to New York business taxes amounting to 22 percent, their Virginia taxes were 6.5 percent.
The “bottom line” dictated the move, Vice President Nicholas Benton told the Washington Star. Benton conceded that Alexandria was not New York—he missed the theater, the shops, the restaurants. But there were other compensations. In New York, he spent forty-five minutes on two buses to travel one mile to his office. Today, he has a big house in McLean and drives to work in twenty-nine minutes, including time out to deposit his daughter at school.
Time-Life was not alone. Many businesses fled—or went out of business—and taxes had a lot to do with it. In 1965, according to the Tax Foundation, New York ranked tenth in local and state taxes, averaging $372 per person. By 1975, it ranked first, averaging $1,025 per person. In those years, New York’s taxes multiplied thirteen times faster than the national average, expanding by 178 percent. It was no surprise, then, that the Fantus Company, the world’s largest business location consultant, concluded in 1975 that New York had the worst business climate of the fifty states.
Sometimes, increased taxation was perceived by New York officials as a less painful, more expedient short-term solution than cutting the budget. “It never was recognized (or, if recognized, never was accepted politically),” observed the final report of the Temporary Commission, “that the City’s taxpayers, its revenue providers, represented a long-term asset of the City that had to be maintained rather than a short-term asset that could be exploited.”
This exploitation was on view during the city’s tax fight of 1966. Early that year, Mayor Lindsay proposed a $520 million tax package, including a first-time city income tax, new business taxes, and a stock transfer tax. The stock exchange let out a scream, threatening to move. They’re bluffing, declared City Comptroller Mario Procaccino, speaking for most city officials. Business leaders protested, prompting an attack from the Mayor and newspaper editorials about their “selfishness.” It was presumed that business needed New York and that passive acceptance of new taxes was part of their civic duty.
Needing state approval, the Mayor took his tax package to Albany. State legislative leaders declared that Lindsay was asking for more taxes than were needed to balance the budget. At first, the Mayor heatedly denied this. By March, he conceded that the package would leave $130 million for new expenditures. Not wanting to accept responsibility, the City Council joined Lindsay in demanding that the state legislature mandate these taxes upon the city. Not wanting to accept responsibility, the state insisted that the city request permissive legislation and then mandate the taxes itself. The feud was not about whether to tax but about who would