Now that thirty years of deregulation and tax cuts for the wealthy have failed so spectacularly, creating an economic catastrophe in its wake, the American people are beginning to recognize conservative economic policy for what it is: a disastrous recipe for privatizing profits and socializing costs, and shifting the economic burden to the poor and middle class.
But with 46 states facing budget shortfalls it is clear that conservative orthodoxy is still alive and holding sway in too many statehouses. Too often, the emphasis isn't on change we can believe in -- but on the same old cutting of services that people need rather than raising taxes on the rich who have disproportionately benefited from fiscal policy over these many decades.
We certainly see this short-sighted and proven wrong approach being pushed in New York. The state is confronting a budget deficit of $15 billion, and Governor Paterson has proposed $9 billion of harsh cuts in education, healthcare and social services, and $5 billion in new taxes that would hit the struggling poor and middle-class the hardest -- making an already regressive tax system even more so.
If you asked most New Yorkers what income level qualifies for the highest tax bracket you would get a range of answers -- from $250,000 to $1 million to $5 million. In fact, an individual making just $20,000 pays the highest income tax rate of 6.85 percent. So a teacher -- perhaps one of thousands who would be laid off under Paterson's proposal -- currently pays the same rate as Bernie Madoff, Donald Trump and the hedge funders. Equally troubling, Paterson's proposed revenues would be generated through taxes and fees on items such as sodas, transportation, cable tv, college tuition … things that would hit the already struggling poor and working class the hardest.
Fortunately there is a great alternative proposal gaining momentum in the New York legislature and with constituents. Democratic Senator and Nation contributor Eric Schneiderman has introduced the Fair Share Tax Reform Act of 2009 which would raise $6 billion in new annual revenues by slightly increasing the taxes on the wealthiest 5 percent of New Yorkers.
"Over the last thirty years the combination of policy changes in New York State have resulted in a severely regressive tax system," Senator Schneiderman told me. "The richest 1 percent of New Yorkers now pay 6.5 percent of their income in state and local taxes. While the middle-class, the poor -- everybody else -- pays over 11 percent of their income in state and local taxes. The poorest New Yorkers -- the bottom quintile -- actually pay 12.6 percent…."
Schneiderman's bill would address this inequity by creating three new tax brackets for the wealthy: tax rates for households earning over $250,000 would rise to 8.25 percent ; over $500,000 would pay 8.97 percent; and over $1 million would be taxed at 10.3 percent. Schneiderman said that this structure would not only create a fairer system, it would also be more in line with neighboring states.
"The long national nightmare of supply-side economics is coming to an end and we're trying to hasten its departure in New York by reintroducing the concept of progressive taxation to the actors in government and to the public," Schneiderman said. "And it's getting a great response."
That response includes a broad coalition led by the Working Families Party (WFP), joined by a network of human services groups, unions, and community action organizations. The coalition acknowledges that some cuts will need to be made. "But we should temper those cuts by asking the rich to pay their fair share of taxes," WFP spokesman Dan Levitan said. "Governor Paterson has proposed devastating cuts to classrooms, hospitals, the elderly and disabled, and everything from mass transit to zoos. Fair Share Tax Reform would stop those cuts and make our tax system more progressive."
Part of what the coalition is focused on is illustrating just what those cuts would mean in local districts -- especially districts with swing Democratic Senators. Currently, Schneiderman's bill has the support of 20 out of 32 Senate Democrats. (There are 30 Senate Republicans who seem to be marching lock-step with the national GOP model of watching the economy crash, people suffer, and supporting nothing but tax cuts and cuts in services.) Next week, a companion bill will be introduced in the Assembly with strong Democratic support and the party in control of 109 out of 150 seats.
"We hope the Governor comes around, and we hope the legislature can help show him there's a better way," Levitan said. "It's a battle for their hearts and minds."
That battle is a tough one. As Schneiderman writes in an upcoming piece for The Nation, "There is a great deal of work ahead of us before America can break free of thirty-five years of virtually unrebutted propaganda, echoed in both parties, teaching us that less regulation means more growth, and that raising taxes kills jobs."
Part of that work involves responding to local editorial boards that often write of "binge spending" and the need for cuts in services without reporting on what those cuts would actually mean to local constituents.
"There's a big disconnect between these bland calls for cutting spending and what the cuts the Governor is talking about would really mean to working families," Levitan said.
That's why the coalition is on the ground, in the districts, documenting the consequences of the proposed cuts. They are organizing with service providers, healthcare workers, teachers, parents and families; holding events and press conferences; finding compelling stories.
Schneiderman and Levitan are both pleased with the progress of the campaign. Schneiderman points to polls that show New Yorkers favoring progressive tax brackets over the proposed cuts by a margin of five-to-one. "The public has wised up to the fact that during this era of supposed tax-cutting, the size of government expanded very rapidly," he said. "We just shifted the cost from the wealthy to the working class…. A lot of [legislators] are willing to consider progressive taxation. I think we just have to show them that the public doesn't jump to the supply-side tune the way they did in the 1980s and 1990s."
Levitan also sees the people ahead of the politicians on this issue. "As people realize the severity of the cuts the Governor has proposed, more and more voices are calling for the wealthy to pay their fair share," he said. "We'll keep pushing until we save our communities."
On March 5, New Yorkers will have the opportunity to build the momentum for a sane budget by rallying in support of fair share tax reform and in opposition to the proposed cuts. Levitan expects tens of thousands of people to attend. It's also critical that residents tell the legislators now where they stand on this issue. Schneiderman said the next few weeks are critical since the budget is scheduled to pass in the end of March.
"We have to do our work," he said. "People who favor a more balanced approach, a more equitable distribution of wealth, have to overcome thirty years of supply-side propaganda…. Because our fiscal year is early, because of the size of our budget gap, I think that what goes on here -- as in California -- has important implications for other states. This is an important moment in our efforts to redefine how the public thinks about the economy. The supply-siders have failed. They drove us into a collapse of historic proportions, and its now important for us to present a reasoned alternative. Progressive taxation has to be a part of that alternative.""
Schneiderman is absolutely right. Across the country, cities and states, governors and mayors, and citizens, are needing to decide -- will we close hospitals? double the size of classrooms? close homeless shelters? lay off teachers? raise tuition costs? Or will we begin to undo the damage of thirty years of tax cuts for the wealthy and rebuild an economy of shared prosperity?
The choices we make now will go far in determining the strength of our long-term economy as well as our pluralistic democracy. In the next few weeks, the nation will see how New York responds.