BALCONY Endorses a New York State Higher Tax on the Wealthy

The Business and Labor Coalition of New York, BALCONY, www.balconynewyork.com, today, called for a New York State income tax increase on the wealthy as a means to help close the $16.4 billion New York State budget gap for 2009-10. Raising the state income tax at the high end is the best choice to balance the ballooning state budget. This was the conclusion reached by BALCONY, a coalition of over one thousand businesses, labor unions, and advocacy groups, after two membership meetings in Albany and New York City in the last two days.

Fiscal Policy Institute Chief Economist James Parrott gave a presentation to the BALCONY members in New York on Wednesday, following presentations in Albany on Tuesday by Ronald Deutsch, Executive Director of New Yorkers for Fiscal Fairness and Frank Mauro, Executive Director of the Fiscal Policy Institute. BALCONY issued a nine-point proposal on higher income taxes for the wealthy.

At the same time, BALCONY released a new Gotham Research Group, www.gothamresearchgroup.com, poll which shows that a vast majority of New York State voters 73% support increasing the state income tax for those who earn more than $500,000 per year in order to help solve the current New York State fiscal crisis. Even when the target population for the tax increase is expanded to those who earn more than $250,000 per year, the measure is still approved by 65% of voters.

"Voters are not persuaded by the argument that higher earners already pay their fair share in taxes," said pollster Jeffrey Levine, who surveyed a representative sample of 400 New York voters from March 20 through 22, 2009. "73% of New Yorkers across the state, from all partisan backgrounds, believe that those who make more should pay more this year in order to address New York's fiscal crisis."

BALCONY believes that raising taxes modestly on New York taxpayers with $500,000 or more of taxable income in conjunction with cost cutting and improved efficiency can solve our budget deficit.

"BALCONY has carefully considered suggestions from its diverse business and labor membership, as well as many citizens from New York State and leading economists to develop its position on solving our state's severe budget deficit. We believe that modestly increasing taxes on our state's high-end income earners (which should not have a significant impact on their families) in conjunction with sensible cost cutting and improvements in efficiencies can solve our state's budget deficit, and keep New York healthy and competitive," asserted Bruce Ventimiglia, BALCONY's business Co-Chairman, and Chairman of Saratoga Capital Management.

Alan Lubin, BALCONY labor Co-Chairman and Executive Vice President of NYSUT added, "BALCONY has long understood that raising new revenue would have to be part of the solution to our worsening economic situation, just as we recognize that prudent state spending is necessary. A New York State Progressive Income Tax increase that will raise at approximately $5 billion is a step in the right direction. It is hoped that these two actions, coupled with the quick investment of federal stimulus monies will help spur the economic recovery and growth needed to provide essential services and a brighter future for all New Yorkers."

New York State faces a $16.4 billion budget deficit this fiscal year, and is under a constitutional obligation to balance its budget. Approximately $7 billion of the state's 2009 -10 budget deficit will be offset by funds from the federal government stimulus program, leaving a shortfall of $9.4 billion. This deficit was not caused by wasteful spending, but instead was created by the harsh economic downturn that confronts both our state and our country. Tragically, Wall Street finds itself in the eye of this economic hurricane, greatly diminishing the nearly 20% of New York State's revenue that the financial industry has in recent years produced.

"This is not just the old saw that state spending is out of control," emphasized Parrott. "Spending has risen because important new commitments to make school aid more equitable and to expand Medicaid coverage have been authorized."

Parrott stated that there are only two meaningful alternatives to balance our state's budget: economic growth or sensible increased taxation. Unfortunately, economic growth is not a viable alternative for the foreseeable future, leaving increased taxation as the only solution, as unpalatable as this may be to some. Parrott also cited statements by Nobel Economics Laureate Joseph Stiglitz and White House Budget Director Peter Orszag to the effect that this was the least damaging of the choices facing states in balancing their budgets .

BALCONY will continue to examine the New York State taxing and budget issues as it receives more input from its diverse membership.

WHY BALCONY SUPPORTS A HIGHER INCOME TAX ON NEW YORK'S WEALTHY AS A MEANS TO SOLVE NEW YORK STATE'S $16.4 BILLION BUDGET DEFICIT

New York State faces a $16.4 billion budget deficit, yet it is under a constitutional obligation to balance its budget.

• Approximately $7 billion of our budget deficit will be offset by funds from the Federal government, leaving a shortfall of $9.4 billion.
• New York State's budget deficit was not caused by wasteful spending, but rather it was created by the harsh economic downturn that both our state and our country are confronted with. Tragically, Wall Street finds itself in the eye of the current economic hurricane, greatly diminishing the approximately 20% of New York State's revenue that it has produced in recent years.
• There are only two meaningful alternatives to meeting our constitutional obligation to balance our state's budget that will not impair our economy: economic growth and/or sensible increased taxation (while cutting costs needs to be part of any fair plan, if costs are cut too deeply our economy could be crippled for years to come). Unfortunately, economic growth is not a viable alternative for the foreseeable future, leaving increasing taxation in a sensible, targeted manner as our only solution, as unpalatable as increasing taxes may be to some.
• Prominent economists, such as Joseph Stiglitz, Peter Orszag and others, suggest that the least harmful way to extricate New York State from its budget crisis is to raise the taxes on high-end income earners. This was done for the three-year period from 2003-2005 when the highest state income tax rate went from 6.85% to 7.7% for people earning over $500,000, and predicted negative effects did not occur (taxes were also increased for taxpayers with incomes above $150,000). Furthermore, Messrs. Stiglitz and Orszag noted, "Reductions in government spending on goods and services, or reductions in transfer payments to lower-income families, are likely to be more damaging to the economy in the short run."
• It is BALCONY's belief that raising taxes modestly on New York's citizens with $500,000 or more of taxable income in conjunction with cost cutting and improvements in the efficiency regarding how our state delivers its services can solve our budget deficit.
• BALCONY thanks all of the $500,000 plus wage earners in New York who are already paying a large portion of our state's income taxes. It is BALCONY's belief that increasing taxes for this component of our population will not significantly impact their lives while it will go a long way toward solving our budget deficit.
• The majority of New York State voters (73%) support increasing the state income tax for those who earn more than $500,000 a year. This finding is from a recent poll conducted by Jeffrey Levine of the Gotham Research Group.
• BALCONY also believes that expansion of the circuit breaker as a way to provide real property tax relief is much needed.

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