To the Point:

Budget options

By William E. Scheuerman

UUP President

As the old saw goes, the two certainties in the roller coaster of life are death and taxes … unless, of course, you happen to be one of the large corporations that takes advantage of big loopholes in New York’s tax laws. Take Toys R Us, for example. This well-known company — supplier of toys and games to millions of children, including Lizzy’s ersatz word processor — doesn’t pay any New York state taxes. Is there something wrong with this picture? Sure there is. But that’s the law, at least in our state.

You should know that Toys R Us is not alone in sidestepping taxes. According to the Revenue Forum of the Fiscal Policy Institute, nowadays corporate taxes in New York account for only 4 percent of the state budget, down from 10 percent 25 years ago.

If state lawmakers closed these overly generous corporate tax loopholes, state revenues would increase by about $1.5 billion.

Why is it so important to close these loopholes? The answer is simplicity itself. Fueled by the terrorist acts of Sept. 11, a lingering economic slowdown, the bursting of Wall Street’s bubble and state tax cuts that could eventually reduce revenues by $16 billion a year, New York state is facing an unprecedented budget deficit of $11.5 billion. Without exploring other revenue options, New York will have to slash and burn state services, including SUNY. Indeed, the proposed 15 percent cut in public funding for SUNY could mean as many as 4,000 faculty layoffs, making it impossible for students to graduate in four years and seriously undercutting the quality of a SUNY education. An extra year to graduate is a pretty steep tax on students and their families.

Another negative: Consider the student-faculty ratio. If we start with a ratio of 20 students to one faculty member, the disappearance of 4,000 faculty would negatively impact 80,000 students. So the tax in the form of extra time needed to complete a degree program is also a tax on a weakened product.

The governor’s budget proposes lots of new user taxes, but they’re all counterproductive. We need an alternative to the endless trend of shifting the tax burden to local taxpayers and making drastic reductions in essential services. Here’s one instance of a “solution” that is likely to exacerbate, rather than resolve, the state’s fiscal crisis. We’re in the midst of a recession and our elected officials want to cut spending on education, even though an educated labor force is essential to get us out of the recession. Think of the long-term consequences of this action. Why would any business locate in New York when our higher education system is a wreck? Where will we get the sophisticated labor force we need? What will this cost us later on?

These are serious questions we need to address now. So, let’s stop the madness and start thinking differently. We don’t want slash and burn; we want learn and earn. That’s why it’s time to explore other revenue options.

Closing corporate loopholes is just one option. Consider another. Those fortunate individuals who earn $300,000 annually are getting a tax break of about $5,000 from the federal government this year. A temporary New York tax on incomes above $100,000 that captures part of this federal tax break on high earners would generate up to $3 billion more. These taxpayers would still receive a substantial break in their overall tax bill, while doing their share to help during these tough times.

And there is no reason why the governor and state Legislature should not aggressively lobby Washington to provide more support for economic recovery and additional relief for the state’s Medicaid obligations.

Perhaps you have some ideas for other revenue choices our elected officials need to consider. I’d love to hear them. E-mail your ideas to me a bscheuer@uupmail.org. Hopefully, we’ll come up with some good options. But even if we don’t, we do need to start a dialogue that’s outside the slash-and-burn paradigm.

Otherwise, the deadly cuts and new taxes provided in the governor’s budget will become real.