Over 200 Organizations Issue Joint Statement on State Budget Crisis. Groups Support Alternatives to Cuts in Services, Oppose Tax Shifts to Property and Sales Taxes ALBANY (January 23, 2003) -- Over 200 community, religious, education, health care, labor and human services organizations from throughout New York State have issued a joint statement endorsing alternatives to cuts in essential services and opposing bigger tax shifts to local property taxes and other regressive taxes and fees. The joint statement was issued today at a press conference at the Legislative Office Building in Albany. It calls for a "common sense budget" that invests in New York families. The speakers at the press conference emphasized that in closing its multi-billion dollar budget gap, New York's elected leaders must identify those spending reductions and revenue increases that do the least harm to the state's economy and to New York's working families. According to Elie Ward, executive director of Statewide Youth Advocates, "that means avoiding service cuts and tax increases that make it harder rather than easier for small businesses to make a profit and to grow. It also means avoiding service cuts and tax increases that make it harder rather than easier for New Yorkers who work hard and play by the rules to move up the socio-economic ladder." Citing a recent paper by Joseph Stiglitz, winner of the 2001 Nobel Prize in Economics, and Peter Orszag of the Brookings Institution, the speakers reminded Governor Pataki that cutting state and local services during the current recession will make the economic situation worse rather than better, and that most service cuts will have a much more negative effect on the economy than other kinds of spending cuts and most tax increases. According to Stiglitz and Orszag, neither service cuts nor tax increases are desirable during a recession if they can be avoided but in choosing among the full range of budget balancing strategies most service cuts will hurt the economy more than most tax increases. The reason for this conclusion is that the most economically harmful kinds of budget balancing actions during a recession are those that take dollar for dollar out of the state's economy. Stiglitz and Orszag conclude that the least damaging type of temporary gap closing action during a recession is a tax on the portions of income that are least likely to be spent; that means a tax on the portion of income over some relatively high level. As Ward pointed out, "A family will spend every dollar of its first $30,000 of income just to survive, but it will spend very little of its 5th $30,000 of income and even less of its 10th $30,000." The Rev. Vernon A. Victorson, Pastor of First Lutheran Church in Albany, spoke on behalf of the New York State Community of Churches. According to Rev. Victorson, "Our larger community, New York State, is in crisis. Is it not time to bring the resources of our entire community together to shoulder the burden of a multi-billion dollar deficit? This burden must be shared. It can not be borne disproportionately by those who have the most need – the poor, the elderly, the disabled, children in day care, children in our schools. The burden cannot be solved by those already doing more than their fair share, for example, working families who have seen their property taxes increase and will undoubtedly see them explode should New York State cuts services as a primary means to close the deficit. The burden must be shared by all for the sake of all. This includes the individual taxpayers who have benefited the most from the federal tax cuts of 2001 and those corporations that benefit from loopholes that drain the state of revenue." Besides hurting the economy, cuts in services also hurt real people. David Clark, M.D., Director of the Children's Hospital at Albany Medical Center and a member of both the America Academy of Pediatrics (District II, New York State) and an active member of the Campaign for Healthy Children spoke to this aspect of New York State's budget challenge. According to Dr. Clark, "As we struggle to find our way out of New York's enormous budget problems, we must be careful that our solutions do not sacrifice the very services and supports that make us such a great state. Making wise choices on how best to expand state revenues so that we can keep all of our children healthy is our current challenge. Parents, doctors, teachers, and state leaders must join together to create smart new revenue choices to support the vital needs of our children and their families." Everett Ford, a resident of Rensselear County who is an active member of the Capital District Chapter of PEF Retirees and of the Retired Public Employees Association, spoke to the need to stop the tax shift. According to Ford, the state has to come up with a fairer way to pay for state services than putting more and more pressure on local property and sales taxes. "Most older folks in this state can't afford more taxes because we are on fixed incomes. We can't tell the state, or any other retirement plan that they must come up with more money for us, but the state can tell us to come up with more money for them. We need a system that is a lot fairer to us older citizens who have paid into the system for all our working years." In suggesting a fair budget that invests in New York families instead of shifting the burden onto local taxpayers, the joint Statement of Support emphasized the need to enact a temporary tax on the portions of family income over $100,000. The speakers emphasized that mainstream economists generally agree that the least damaging type of temporary gap closing action during a recession is a tax on the portions of income over some relatively high level. Robert Plattner a tax lawyer in private practice in Albany and a member of the board of directors of the Schuyler Center for Analysis and Advocacy, also presented three additional arguments for this approach. "First, the huge federal tax cut enacted in 2001 provides generous cuts in the federal personal income tax, with these benefits strongly tilted toward higher﷓income taxpayers. These tax cuts create room for the states to respond to their revenue shortfalls in part by claiming some portion of the tax savings of the major beneficiaries of the federal tax cut. Taking back some of these taxpayers' federal tax cut is not, as some might suggest, about class warfare or punishing success. Instead, it is a way, absent any concrete economic assistance from Washington, for states to create their own temporary, federal revenue sharing stream to help them navigate their most severe budget crisis in six decades. The beauty of the strategy is that affected taxpayers, even while temporarily shouldering an increased state tax burden, still would receive large overall personal income tax reductions." Under the 2001 tax cuts, the top federal income tax rate is being cut by 4.5% from 39.6% in 2000 to 35% beginning in 2002. President Bush has recently proposed accelerating the implementation of these scheduled tax cuts. Plattner also pointed out that "Since state personal income taxes are deductible for federal income tax purposes, the federal government would in effect "pay for" a substantial chunk of an increase in the state personal income tax." For example, if a family with taxable income of $1,200,000 in 2002 were paying an additional $10,000 in state income taxes, their federal income tax would be reduced by $3,860 (the $10,000 times the federal income tax rate, 38.6%, that is applicable to the portion of taxable income above $307,051 in 2002). Third, because of New York State's heavy reliance on property and sales taxes, low- and middle-income families are currently paying between 11% and 12.6% of their income in state and local taxes, while the best-off families have a much lower average effective tax rate - - 6.46%. The speakers at the press conference presented the results of a recently completed analysis by the Institute on Taxation and Economic Policy (ITEP) of the incidence (i.e., the impact by income groupings) of the New York's state and local taxes that found that: Ø The state and local tax rate of the best off one percent of New York families - with average incomes of $1.66 million - is 9.12% before accounting for the tax savings from federal itemized deductions, and 6.46% after taking this federal offset into consideration. Ø The tax rate on families in the middle of the income distribution - those earning between $27,000 and $44,000 - is 11.94% before the federal offset and 11.61% after. (Note: the effect of federal deductibility is much lower in this income range for three reasons: most taxpayers at this income level take the standard deduction rather than itemizing their deductions, a much smaller portion of the taxes paid by families in this income category are deductible, and the marginal tax rate for these taxpayers is much lower: 15%.) Ø And, the average effective tax rate on the poorest New York families - those earning less than $15,000 - is the highest of all: 12.67% before the federal offset and 12.63% after. According to Robert McIntyre, ITEP's tax policy director, "New York's income tax fails to offset the regressivity of its sales and excise taxes, giving the state an unfair and regressive tax system. Taxes ought to be based on people's ability to pay them, which means that the share of income paid in taxes should rise as income grows, not fall as is the case in New York." If New York were, for example, to add a temporary surcharge of 1% on the portion of incomes above $160,000 and another 1% on the portion of income above $634,000, the top 5% of taxpayers would still be paying considerably less of their income in state and local taxes than the other 95% of state taxpayers, but the state government would receive billions a year more in revenues - with the federal treasury offsetting about one-third of those payments because of the benefits of federal deductibility. Besides recommending that New York State close part of its budget gap through a temporary surcharge on the portions of income over some relatively high level, the joint Statement of Support also recommends that New York State l close corporate loopholes that allow large multi-state and multi-national corporations to avoid paying taxes on the profits that they generate in New York State, and l press the federal government to help the states to deal with the fiscal stress that they are experiencing as a result of September 11th and the national recession. In discussing the issue of corporate loopholes, Trudi Renwick, a senior economist with the Fiscal Policy Institute, reviewed some of the accounting tricks and other "income shifting techniques" that large multi-national corporations use to avoid paying taxes on what they earn in New York State. "Until we close the loopholes that large corporations use to avoid paying for a fair share of the cost of essential public services, the portion of the state budget covered by corporate taxes will continue to decline and these firms will continue to enjoy unfair competitive advantages over their local New York-only competitors." Michael Kink, the Legislative Counsel for Housing Works, discussed the importance of both federal help for New York in accommodating the revenue losses directly attributable to the World Trade Center disaster and federal fiscal relief for the states generally as part of the federal government's efforts to jump start the economy. According to Kink, ""Right now our state needs public and private sector leaders who will fight for our interests in Washington. Governor Pataki, state legislative leaders and New York's congressional delegation, from both parties, must speak up and fight hard for federal aid for the tax revenue losses that New York State and New York City have experienced as a direct result of the attacks on the World Trade Center. Business, labor, civic and other private sector leaders from New York have to assist in this effort, the way that they helped in the successful fight to save state and local tax deductibility in 1985 and 1986. New York's public and private sector leaders must also join with the elected officials and other leaders from throughout the country who are making the case for state fiscal relief through increased federal Medicaid reimbursements or some other form of federal revenue sharing. This is an important battle that must be waged on behalf of all New Yorkers. For New Yorkers with disabilities, it's a matter of life and death." Richard Kirsch, executive director of Citizen Action of New York, said "Instead of job killing cuts to education and health care, the Governor should close corporate tax loopholes and raise taxes on incomes over $100,000." Governor Pataki has talked about avoiding job-killing tax increases but according to Kirsch, the Governor must apply the same criteria to government services and infrastructure investments. "We certainly should avoid both job-killing service cuts and job killing tax increases but we should also avoid family-destroying tax increases and service cuts; opportunity-squelching tax increases and service cuts, and low-income-workforce-expanding tax increases and service cuts." The discussion of low-income-workforce-expanding service cuts and tax increases was a reference to the SUNY tuition increase which, if history is any guide, will move tens of thousands of young adults out of college and into the low wage workforce. Representatives of the Pataki Administration are defending the proposed 40% increase in SUNY tuition by saying that there hasn't been a tuition increase for seven years. That doesn't mean that middle income families whose incomes have been stagnant during the 1990s are going to be able to afford an out-of-the-blue all-at-once increase in tuition of $1,400 a year. When Governor Pataki implemented his last big tuition increase in 1995, there was a 30,000 drop off in SUNY/CUNY enrollment. That meant 30,000 more people without college degrees forced into the low-wage job market. "Good jobs require educated New Yorkers, safe communities, affordable health care and reliable transportation. We can't grow good jobs in New York if we abandon New York's families." The 200 Organizational endorsers Organization Abundant Life Tabernacle Addison Central School District Preschool & Head Start Program Adults & Children with Developmental Learning Disabilities (ACLD) Adventist Care Center Alliance for Democracy, Capital District NY Chapter Alliance for Quality Education American Association of Jews from the Former USSR, New York Chapter American Federation of Government Employees Local 1151 Asian-American Legal Defense & Education Fund Bangor Baptist Chapel Food Pantry Beginning With Children Bethany Feeds the Hungry Bethany U.M. Church Hunger Committee Bethpage Adolescent Development Association (BADA) Bowery Residents’ Committee Brennan Center for Justice Bronx Real Apartment Program Brooklyn Wide Interagency Council for the Aging Educational Fund (BWICA) Cabrini Immigrant Services Calvary Baptist Church Food Pantry Calvary UFW Baptist Church Carleton Manor Resident Council and Community Service Program Catholic Charities of Schoharie County Cayuga-Seneca Community Action Agency Center for Community Change Center for Independence of the Disabled Center for Study of Working Class Life Central Harlem HIV Care Network Central Nassau Guidance and Counseling Services, Inc. Chemung County Housing Coalition Child Care Center at Christ Church Child Care Council at City University Child Care Council of Dutchess, Inc. Child Care, Inc. Child Development Support Corp. Child Welfare Organizing Project Children’s Defense Fund-NY Church of St. Joseph Citizen Action of NY Citizens Advice Bureau Citizens Environmental Coalition Citizens for Universal Health Care (CUH) City Project Civil Service Employees Association Class Size Matters Coalition for After-School Funding (CASF) Coalition for Glen Clove Coalition for the Homeless Committee for Hispanic Children & Families, Inc. Communication Workers of America District 1 Communication Workers of America Local 1180 Community Advocates Community Food Resource Center Community Maternity Services Community Service Associates Community Service Society Community Voices Heard Council of Community Services of New York State David E. Rogers Center Disabilities Network of NYC (DNNYC) Doubleday Babcock Center Dutchess Outreach, Inc. East Rochester Community Resource Center Eastchester Community Action Program Elders Share the Arts Elmira Community Kitchen Emmarus House Environmental Advocates of New York Erie County Coalition on the Homeless Faith and Hunger Network Families at Risk of America in New York Family and Children Association Family Counseling Service Family of Ellenville Family Planning Advocates of NYS Fifth Avenue Committee Fight for Families Coalition Fiscal Policy Institute Five Borough Institute Florence E. Browne Funeral Home Food Bank of the Southern Tier Fort Greene Food Pantry-Queen of All Saints Church Generations Goddard Riverside Community Center Good Jobs New York Good Old Lower East Side, Inc. Gotham Center for NYC History Grace Church Community Center Greater Corning-Elmira Chapter of National Organization for Women Greater Mt. Zion Pentecostal Church Greater New York Labor-Religious Coalition Greater Upstate Law Project (GULP) Green Party of Erie County Green Party of New York State Greenwood Lake Food Pantry Gwendolyn B. Bland Day Care Center Harlem Independent Living Center Harlem Tenants Council Hatzilu Rescue Organization Haverstraw Parent Group Food Pantry Health & Welfare Council of Long Island Healthy Schools Network Help from People to People, Inc. HELP USA Helping Out People Everywhere, Inc. (HOPE) Hempstead Hispanic Civic Association , Inc. Herbert G. Birch Services Hollis/St. Albans Emergency Food Services Holy Cross Church Holy Trinity Outreach Program Hope for Youth HOUR Children Housing Works Hunger Action Network of NYS Interfaith Impact of NYS International League of Muslim Women, Inc. Ithaca Democratic Socialists of America Jewish Agency Services for the Aging (JASA) Jewish Services Coalition Joint Public Affairs Committee for Older Adults (JPAC) Justice and Peace Office of Catholic Charities-Elmira Khidman Corp. Kids Against Pollution Lexington Center for Recovery, Inc. Little Sisters of the Assumption Family Health Long Island Council of Churches Long Island Progressive Coalition Lower Washington Heights Neighborhood Association Machon-Chana Mad Science of Albany & Rochester Make the Road by Walking Mental Health Association in Dutchess County Metro Justice Metro New York Health Care for All Campaign Migrant Education Outreach Program Miracle Makers, Inc. Mohawk Valley Peace Coalition Mt. Vernon United Tenants, Inc. National Association of Korean Americans, New York Chapter National Association of Social Workers, NYC Chapter National Association of Social Workers, NYS National Center for Schools and Communities National Education Association of NY Neighborhood Economic Development Advocacy Project New Directions Community Based Research Inst. New Hope Missionary Baptist Church New Politics Club of Long Island New York ACORN New York AIDS Coalition New York City AIDS Housing Network New York City Arts Coalition New York City Coalition Against Hunger New York City Gay and Lesbian Anti-Violence Project, Inc. New York Immigration Coalition New York State Child Care Coordinating Council New York State Coalition Against Domestic Violence New York State Community Action Association New York State Community of Churches New York State Defenders Association New York State Episcopal Public Policy Network New York State Nurses Association (NYSNA) New York Statewide Senior Action Council New York Unemployment Project North Amityville Community Economic Development Council, Inc North East Block Club Alliance, Inc. (NEBCA) Nurses United-Communication Workers of America Odessa-Montour Teachers’ Association Our Lady of the Rosary Church Partnership for After School Education, Inc. (PASE) Physicians for Social Responsibility – New York City Pius XII Youth & Family Services Port Counseling Center, Inc. Positive Health Project, Inc. Pratt Institute Center for Community and Environmental Development Primitive Christian Church Prisoners’ Legal Services of NY Professional Staff Congress/CUNY Public Employees Federation Public Health Association of New York City Public Interest Law Office of Rochester Public Utility Law Project Real Majority Project Salvation Army, Syracuse Area Services Schenectady Inner City Ministry Food Program (SICM) Schuyler Center for Analysis & Advocacy SENSES Sewanhaka Federation of Teachers Sisters of Charity of New York, Office of Justice and Peace Social Responsibility Committee of the Unitarian Universalist Congregation of Binghamton Soundview Presbyterian Church Food Pantry South Bronx Action Group, Inc. South Bronx Clean Air Coalition Southern Tier AIDS Program Southern Tier Labor-Religion Coalition St. Anthony’s Outreach St. Catherine of Sienna St. James Plaza St. John’s Center St. Joseph the Worker Parish Outreach St. Joseph’s Church Food Pantry St. Margaret Mary Church St. Margaret’s Food Pantry St. Nicholas of Tolentine St. Rose of Lima Parish Outreach St. Vincent DePaul Society Statewide Youth Advocacy STEPS to End Family Violence Teachers Network The American Academy of Pediatrics, Dist II NYS The Campaign for Healthy Children The Interfaith Alliance of NYS The Long Island Coalition for a National Health Plan The Neighborhood Center of Utica, NY, Inc. The Suffolk Community Council Thorpe Family Residence Tompkins County Living Wage Coalition Twenty-First Century Foundation United University Professions University Settlement Society of NY Upstream Consulting Utica Citizens in Action Village Independent Democrats, NYC W. Haywood Burns After-school Program Welfare Rights Initiative (WRI) West Harlem Environmental Action West Side Campaign Against Hunger Westchester Progressive Forum Working Families Party Young Korean-American Service & Education Center Inc. (YKASEC) YWCA Grosvenor Early Learning Center