Labor Offers Perspective on Tax Policy at New York State Senate Hearing
Maintaining services, ensuring accountability in economic development, and closing loopholes are essential to smart tax policy
ALBANY, NY (10/04/2013)(readMedia)-- This morning, New York State AFL-CIO President Mario Cilento testified at a joint hearing on existing tax policy and reform initiatives held by the New York State Senate Committee on Finance and the Committee on Investigations and Government Operations.
In the wake of burgeoning income inequality and in the face of a state projected budget deficit, Cilento warned that further cuts in services including education, public health care, infrastructure and public safety would harm New York's families.
"We must approach tax policy from the perspective of New York State's workers, rather than from the perspective of corporations and the wealthy," said Cilento. "This fundamental shift will enable us to create new ladders to the middle class and restore some semblance of basic economic fairness in our society.
"To accomplish this, we must focus on the relationship between taxes and services, ensure accountability in economic development tax breaks, and eliminate loopholes that put hardworking New Yorkers at a disadvantage."
Cilento later added, "Given that we have had to endure and fight against cuts to education, aid to local governments, state operations and we are fighting health care cuts and closures of hospitals like SUNY Downstate or mental health facilities, we need to start talking about how we sustain services that people need, before we consider tax cuts. And in doing so, we need to consider the current and future needs of the state."
A copy of the full written testimony is below.
NEW YORK STATE AFL-CIO PRESIDENT MARIO CILENTO'S TESTIMONY TO THE STATE SENATE COMMITTEE ON FINANCE AND THE COMMITTEE ON INVESTIGATIONS AND GOVERNMENT OPERATIONS
October 4, 2013
Thank you for the invitation to present testimony on New York State tax policy and opportunities for reform.
Much attention recently has been paid to the dramatic income inequality that exists throughout the country and our state, an inequity that is growing and wreaking havoc with the finances and well-being of hardworking New Yorkers who are working harder and harder, but falling further and further behind. Attention on this growing problem as it relates to public policy, particularly taxation, is critical, because if we are to grow our state and if we expect people to stay in New York or move to New York, we must ensure that all individuals and families have an opportunity to thrive. This growing inequity is clearly reducing the ranks of the middle class and we all should be alarmed that the trend is accelerating.
Taxation is only one of many issues related to the growing inequity. But, to break this pattern, we must change the way we think about policy matters, including tax policy. We must approach tax policy from the perspective of New York State's workers, rather than from the perspective of corporations and the wealthy. This fundamental shift will enable us to create new ladders to the middle class and restore some semblance of basic economic fairness in our society.
To accomplish this, we must focus on the relationship between taxes and services, ensure accountability in economic development tax breaks, and eliminate loopholes that put hardworking New Yorkers at a disadvantage.
We must first question the effect of any tax reform on the ability of the state to provide the capital needs that we all rely on as well as the vital public services that we all need.
Given that we have had to endure and fight against cuts to education, aid to local governments, state operations and we are fighting health care cuts and closures of hospitals like SUNY Downstate or mental health facilities, we need to start talking about how we sustain services that people need, before we consider tax cuts. And in doing so, we need to consider the current and future needs of the state. For example:
• Report after report suggests that our roads, highways and bridges need major improvements and massive investment if we are to ensure safe and reliable transportation and commerce;
• As we saw during the extreme weather over the last several years our dams, sewers, storm drainage and other water related infrastructure need massive investment;
• Our schools are now required to do more testing in the name of raising standards even as we have lost 35,000 teachers over the last several years and our state aid has not kept up with the needs of local districts;
• Our public colleges need repairs and upgrades to their physical infrastructure;
• We are closing public hospitals nursing homes, mental health hospitals and we don't have enough services for families seeking help for developmentally disabled relatives;
• We are closing prisons and juvenile justice facilities which will impact our public safety;
• Our energy infrastructure, both in terms of power generation and in terms of transmission, need massive investments if we are to keep energy costs down and still meet the needs of business that are looking to locate here; and
• We need more assistance for our local governments, so that they can provide services as well.
The list goes on and on.
Needs are growing, not shrinking, meaning we will need more state dollars, not less, at a time when we clearly cannot rely on the federal government for more funds.
We must also remember that we have already reduced pension benefits, increased health care costs and made changes to collective bargaining rights of public workers. For some that is not enough, but for those who argue for more attacks against worker protections, you will never reduce benefits or worker rights enough. The truth is that reductions in the rights and benefits of workers have not improved the short-term outlook and further reductions will not improve the long-term outlook because it is not the workers who have caused problems in the first place.
The fact is we cannot afford shortsighted tax cuts at this time
We are looking at a $1.7 billion deficit in next year's budget. After years of cutting services, we still have this deficit, even with the economic recovery. This indicates that at least part of the problem stems from past broad based income tax cuts at both the federal and state level.
Past income tax cuts have led to multi-year, chronic state budget shortfalls that were exacerbated by the Great Recession. Enacting similar cuts now has the potential to thrust our state into the throes of an even worse situation and if there is another economic downturn, this could be disastrous.
Any new tax cut will reduce state revenue and in turn greatly reduce state aid to schools, roads, bridges, healthcare, local governments and other critical services. This is a much graver problem now than in times of previous cuts. In order to make up for revenue lost as a result of previous income tax cuts at the federal and state level, property taxes were forced up.
This is a much more regressive approach, but unfortunately, the only option. In response to the legacy of increases in property taxes precipitated by income tax cuts made over the past 25 years, the 2011 property tax cap was enacted.
If municipalities are now confronted with a new round of reductions in state aid they have no option but to eliminate services, which are already stretched to the breaking point. If allowed to happen, this will inhibit New York's economic success.
In addition to maintaining services, we must also ensure that our tax policy fosters and promotes the creation of good, long term, family-sustaining jobs. To accomplish this, we must begin by ignoring the same incessant, tired proclamations by "taxpayer advocates" that lowering corporate taxes will create jobs and that New York is the worst state for business. Instead, we must ensure that we do not repeat the same mistakes that led to failed and empty promises that we heard from IDAs, brownfield cleanups, Empire Zones and other initiatives that called for multi-year tax cuts.
That means ensuring that we are developing careers, not short term tasks or jobs that never materialize. We must also foster establishment of industries that will employ future generations of New Yorkers.
Further, public dollars should come with requirements such as prevailing wage and project labor agreements for construction and minimum standards for permanent jobs, all to ensure that workers are compensated and treated fairly.
There also must be a minimum level of accountability. In 2011, 46% of projects receiving support from Industrial Development Agencies either lost jobs, failed to create a single job, or had no job promises. This is unacceptable. We must require commitments from those accepting public dollars and institute a mechanism to claw back incentives in the event that those commitments are not met.
No one forces private enterprise to accept public money. If businesses choose to do so, it is incumbent upon government to demand a meaningful return on the investment.
Finally, we must eliminate loopholes and tax credits that hurt workers. These loopholes include those which allow subversion of the corporate alternative minimum tax and permit investment management income to be taxed at lower rates than wages or other business income. One particularly problematic credit is the Minimum Wage Reimbursement Credit. This credit discourages employers from paying teenagers more than the minimum wage and encourages employers to employ only teenagers at minimum wage.
In closing, we need to remember that taxes are not inherently good or bad; they are a means to providing the services we value as a society. So when you ask what taxes we should cut or reforms we should make, the more fitting question is what are you prepared to sacrifice? Your child's education? The roads or mass transit you take to work every day? The police officer patrolling your street? Or, how about care for the disabled?
That is not a choice I think any of us are willing to make, nor should we be, and certainly not the legacy we hope to leave behind.
Thank you again for allowing me to testify today and I'd be happy to answer any questions.
The New York State AFL-CIO is a federation of 3,000 affiliated public sector, private sector, and building trades unions throughout the state representing 2.5 million members, retirees and their families. Our State Federation, which is the largest and most diverse in the country, is committed to helping working families achieve a better life. For more information on the Labor Movement in New York, visit www.nysaflcio.org.