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At 7:30 AM on the Monday morning after Thanksgiving, most of us were still shaking off the long holiday weekend. In New York City, they were busy passing a massive tax increase.
Early bird, Republican Mayor Michael Bloomberg signed an 18.5 percent property tax rate increase, which is expected to take an extra $837 million from city residents this year. The meeting was timed at such an inconvenient hour, and without much advance warning, in order to silence opposition to the tax hike. No one testified either for or against the proposal, which is the largest tax increase in New York City history.
New York is already the highest taxed major city in the country, but that’s not enough. City officials say the higher taxes are necessary to bridge a $1.1 billion budget gap this year and to reduce a projected $6.4 billion deficit for the next fiscal year.
Property taxes, of course, are passed along to the city’s renters and businesses in the form of higher rents. Restaurants and shops will be forced to raise prices. The result will be less economic activity.
In fact, a study using the highly regarded Manhattan Institute’s NYC-STAMP econometric model suggests that New York City’s struggling economy will lose another 62,000 private sector jobs as a result of the tax hike. The tax hike will kill any job recovery in 2003 for New York’s struggling workforce, which has lost 150,000 jobs since 2000. The danger is that the city is entering a downward spiral of ever-higher taxes killing the economy, which, in turn, hurts overall tax revenue, which prompts the city to raise taxes yet again.
If Mayor Bloomberg was seriously interested in reviving the New York City economy, he’d boldly step forward and cut taxes and spending. Can you imagine the buzz of new activity if Bloomberg cut taxes 19 percent instead of raising them? If Mr. Bloomberg wanted to boost the city economy, he’d go even further and abolish arcane zoning laws that distort property prices and depress new housing construction.
The Big Apple enjoyed a real Renaissance under Rudy Giuliani. Mayor Giuliani was combative—he took on the public unions and the homeless advocates—but that’s what the city needed. He cut taxes and made the tough choices needed to turn New York City around.
Mayor Bloomberg, on the other hand, appears to be cowardly and small minded. He’s been totally boxed in by the unions and the economic slowdown. In fact, Bloomberg originally proposed a hike of 25 percent, but the left-wingers in the City Council actually reduced the tax increase! You know there’s a problem when the Democrats are reducing the size of a Republican’s tax increase.
Even worse, Bloomberg strongly suggested that he will raise taxes again next year. He was quoted in the New York Times today as telling a breakfast audience, “I can guarantee that everyone in this room is going to have to dig deeper into their pockets because we are going to have to tax everybody more.”
Simply put, tax hikes are self destructive and are just another burden for struggling New Yorkers to carry as they rebuild the city in 2003. Unfortunately, some of the evil forces that nearly destroyed the Big Apple in the 1970s and 80s— powerful city unions, out-of-control spending, and high taxes—are back. Let’s just hope they don’t escape from New York.