Tuesday, October 26, 1999


The Deadly Tax Reduction Trap 10/25/1995

LOOKING AHEAD by Wally Dobelis
Any politician who comes here promising to reduce our taxes and balance our budget (Federal or local) ought to be tarred and feathered and ridden out of town on a rail, as was done to Huck Finn's tricksters, the Duke of Bilgewater and the pretender King. We the voters must learn to understand, once and for all, that tax/budget relief is like the Duke's Cameleopard, a bogus animal, a political campaign mirage, held out by tricksters. They cannot fulfill it, no matter how much they cut the government bloat. Once in power, they will fool us, by shifting taxes, sometimes fairly but not always - because they owe favors to their moneyed contributors. True tax relief is impossible, first because of our increasing longevity that keeps raising the social burden for the health and living expenses of the old (the 4/1 worker/retiree ratio will be 3/1 by 2015), and second because of increasing technological unemployment that robs the economic environment of jobs for the uneducated and less mentally gifted, and turns ever more of them into wards of society.
The latest example of a tax shift to those who can afford it the least is the 20 percent transit fare increase due November 12, expected to generate $400 Million a year from the daily 1.3 Million subway and 600,000 bus rides, if ridership does not dwindle. Governor Pataki met his campaign promise to cut taxes (cost: $515 Million this fiscal year, $1.8 Billion the next) by taking $300 Million from a fund maintained with contributions from downstate tax payers for the support the TA, meanwhile continuing subsidies for the other NYS mass transit systems. Commuter railroad fares went up only 9 percent. The fares for express buses, biggest money losers percentage-wise, 2/3 of which serve Staten Island, will not be raised at all from the $4 fare, and all fare increases will be delayed a week, until after the Nov. 7 elections. The latter motion was introduced by the Governor Pataki's Staten Island appointee to the MTA board. Could these two events be related to the running of Guy V. Molinari, a Friend Of Pataki, for D.A. on S.I?
Meanwhile, another FOP and appointee, E. Virgil Conway, the MTA chairman, has pledged not to ask for state subsidies for the TA, and to buy new buses, trains and signal systems, paying for them by taking $215 Million annually from the operating income and the rest through debt, to be paid by our children. The MTA spends 1.3 Billion (15 year average) in modernization. Let's first see him attack mismanagement, and get savings from correcting bad scheduling and featherbedding. More tax money usually takes the edge off the bureaucrat's sense of emergency. This person is obviously not going to be the city's defender.
And what of our other defender, Mayor Rudolph W. Giuliani, who withdrew an $124 Million annual subsidy from the TA? He instructs his four (of 11) appointees to vote against the increase, full well knowing that they had no chance against the Governor. Your'e kiddin', Rudy! You fought off the mob in the Fulton Fish Market, in the Javits Exhibition Hall, you tried to get control of the Board of Ed gang - why don't you try to get in there and clean up the lax TA management, and the union rules that empower slackers and profiteers? Everyone knows they are there. One story: this maintenance man came to work for TA full of enthusiasm to produce, until he was worn out - not by work but by his co-workers, who threatened him about working too hard. Now he comes home three days out of four with no grease on his hands, and devotes lots of his on-the-job time to his part-time business.
And Speaker Sheldon Silver, why did he not stop this new flat tax, the fare increase, in the Assembly? It seems that all the tax shifts favor the affluent voters, the commuters. We have the people of Mott Haven, in the 2nd poorest Congressional District in the whole USA (hear it, the whole USA!), home of PS 65, one of the worst schools in the city. Jonathan Kozol's words about them (Amazing Grace, 1995) make you cry, literally. Such areas have been discarded, relegated to holding pens. The favored suburbanites do not pay the real estate taxes to keep these parts of the city going - neither our tripled-over coop and apartment taxes in East Midtown, the T&V area, nor the lesser but not less painful ones in Queens. How about increasing their contribution?
To keep the professionals and their salaries here, the Mayor has spent gobs of money in cash and tax breaks, such as $80 Million for the Coffee, Sugar and Cocoa Exchange, $184 Million for the Mercantile Exchange, fighting off the predator, Gov. Whitman of N.J., whose actions drive New York City deeper in debt. She has cleared land to offer, and tax reductions to recover, and will keep up the raids. She has no choice. The Mayor will spend and spend to discourage her, and the tax giveaways will have to be made up elsewhere. It is free enterprise; the giveaways will increase our residential taxes, but there may be jobs created. And maybe not. Another down spiral, centered on the politicians' main bait, tax reduction promises.
Which brings up the national flat tax increases for the poor, the Medicare and Earned Tax Credit legislation. The House Medicare bill will save $270 Billion over seven years, Republicans contend. Democrats reply that $90 Billion would be enough, and the balance is intended to help fund the Republicans' tax cut of $245 Billion. The direct funding of the Medicare savings is by increasing Part B premiums (from $46.10/mo to $87.60 by the 2002, vs to $60.80 under the current law); the indirect will be by moving recipients into managed care (HMO, PPO), or high-deductible plans with medical savings accounts, and by cutting medical reimbursements, which will cut covered services. People who want to continue with the present level of care and with fee-for-service providers who are not in the managed care plans will have to pay extra for it. Fixed deductibles and maximums per service or impairment in a growing cost environment will increase beneficiaries' costs. How else will the government be able to reduce its projected spending per beneficiary by 2002, from $8,000 to 6,700 (it is $4,800 now)? These are some of the hidden expenses in the plan that will increase Medicare cost to the beneficiary by more than the premium increase. No one disputes that Medicare needs reform - it is by how much, and what part of the hidden cost will go to fund the tax reduction. This bill is generating another tax shift, a flat tax that will hurt most at the low income levels. A justifyable correction would be to make the premiums more income-graded.
As to the Earned Income Credit, it is paid to people who earn barely above subsistence levels, and need encouragement not to go on relief. With the expected EIC reductions, coupled with the restrictions, inequalities and limits in AFDC and Home Relief under state administration, more people may end up homeless. The legislators who label the program as full of abuses should attack the abusers, not the struggling low income recipients of this tax benefit.
Why the tax shifts to the poor? Well, the political system is sick. The people voted for Clinton in 1992, to remedy bloated government and provide social reform. He failed, because of inept planning, and also because the opponents stopped any progress. The people lost, because the legislators and administration wasted both time and money in treading water, quarreling and not getting any results. In revolt, some of the same people voted in a Republican Congress in 1994, to remedy bloated government and produce social reform. The winners now have to propose tightened social services and spurious tax reductions, actually shifts to flat tax, to keep their promises. The President will veto the worst, and the people will lose, both time and money, again. I submit that a major reason for the bad legislation and logjams is the first law in politics: "the politician's primary responsibility is to get reelected," which means coddling the wealthy donors who make campaign contributions, and giving them benefits. The poor people lose.
The way out? There are two: either limit campaign contributions and campaign period (politicians also engage in theft of services - we end up paying them and staff for campaign work that they do on time paid for by the public); or, limit their terms of office (in the hope that at least in the last term they will owe nothin' to nobody, and will act statesmanlike. Alas, the rub - they may try to buy into post-politics jobs.) The British, world's oldest democracy (sort of, remember Magna Carta of 1215), have successfully limited campaign terms and, consequently, contributions. Limiting funds and campaign period is the best solution - today campaigners with unlimited money and ambition can literally buy the office, as the nonentity Huffington almost did, in 1994 (remember, in California, running for Senate against Feinstein). Both parties have at some points offered these remedies, but those were ruses - you don't expect politicians to vote against themselves? I suspect that a groundswell for statewide referenda will be needed to generate these, most necessary reforms. Unless we reform election rules, we - and our children - will be doomed, by the politicians we elect, regardless of party. It is a no-win for the voter.
Wally Dobelis claims to be beset by computer gremlins, who, most recently, turned a "guilty" into "not guilty" in his O.J.Simpson-inspired op-ed article (10/12/95). We offered to buy an ethnographically correct hex wand to banish bad spirits, but he is holding out for a better scanner technology. We will go by results, with a fresh eye, Kimberly, in the shop. Best wishes, Kim, and Todd, in all of your pursuits!
And congrats to Bernard and Pauline Goodman. Bernie, ex-community organizer, now an American Primitive, had an exhibition of his paintings in Atlanta.

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