The Streets Were Paved with Gold - Ken Auletta [42]
By December, as city officials were laboring on the next year’s budget, word was leaked of the “strong possibility” of new taxes. New taxes is what the city got. The commercial rent occupancy tax went up, as did the utility tax, the insurance corporation tax, the unincorporated income tax, the commuter tax, the sales tax, and an array of nuisance taxes. The corporate income tax was raised in 1971 from 5.5 to 6.7 percent, and again in 1975 to 10.05 percent. The city’s personal income tax more than doubled. Real-estate taxes zoomed 33 percent between 1970 and 1975.
In the early sixties, many of the city’s industries began to suffer job losses, though these were camouflaged by the growth of government jobs. Not until 1969, however, did the city overall suffer a massive employment decline, eventually losing one of every six private sector jobs. Taxation was a chief culprit. “High levels of taxation have been a major contributing factor in causing job loss,” said the 1976 report of Governor Carey’s Special Task Force on Taxation, which found that in 1974 New York’s taxes were 55 percent above the national average. A 1974 study by the city’s Budget Bureau estimated that between 1966 and 1971 the city lost 44,500 factory jobs that it would not have lost if its tax burden had been less severe. The Temporary Commission estimated that by 1981 the city’s 10.05 percent business income tax would result in the loss of an additional 149,000 manufacturing jobs. Reducing this tax, they said, would mean the immediate loss of $90 million of city revenues. But, if the city failed to act, an equal amount of revenue would be lost by 1981 because of lost jobs.
The flight of fifty-five of the Fortune 500 companies attracted publicity, but the city’s job loss cannot be traced to large firms moving to the Sunbelt or Connecticut. According to the Special Task Force, of the 660,000 jobs lost from 1969 to 1976, only 27,000 resulted from the exodus of large headquarter corporations. Most of the lost jobs came from smaller firms quietly going out of business. New York is the nation’s premier beer market. Once the home of 121 breweries, today New York has none. Schaefer, Rheingold, Schlitz, Piels—they moved because it was too expensive to do business here.
Taxes also help to explain the flight of middle- and upper-income taxpayers. In 1974, according to a survey by Nicholas Kisburg of Teamsters Joint Council 16, 20.9 percent of the average resident’s income was drained by local and state taxes—nearly double the 1959 rate. “The tax collector, rather than the employer—at least in New York—is the worker’s major adversary,” said local Teamsters President Joseph Treretola in 1977.
“Past policies have led to the dissipation of our economic assets,” Governor Carey’s 1977 budget message declared. “We have diverted too much of our resources to the public sector. Over 80 percent of the employment growth between 1970 and 1975 was in government—only 20 percent was in the private sector. We failed to recognize that in the long run only growth in the private sector would enable us to pay for our public programs. This left us particularly vulnerable to economic recession.”
With that year’s budget in mind, that year’s election, that week’s crisis, city and state officials adopted a soak-the-rich—soak-everybody—tax policy. Politically, this was better politics than cutting the rate at which expenditures were rising. Besides, officials sincerely believed the rich should pay more. They should, but they don’t have to stay in New York, not when there are forty-nine other states.
Pay Parity and Buck Passing to Arbitrators
Passing the buck is mother’s milk to politicians. One way to view the city’s strange fiscal behavior is as a history of buck passing—first to the state, then to the capital budget, then to next year’s budget, future