Democratic Party control of the U. S. Congress and the New York State governor’s office may well have significant impacts on New York City’s public and private finances. On the other hand, the level of financial aid and relief will be restrained by long-term federal, state, and city budget problems, economic uncertainties, and Republican Party power at the presidential and state senate level.
But here’s some of the good news. As the New York Times reported, after 12 years of minority status, “the ascendant Democrats in the House and Senate are well positioned to deliver hundreds of millions of new dollars to New York.”
In Washington â€“ Power Perches, Tax Relief
Senator Charles Schumer’s seats on the Senate Finance and Banking Committees will put him at the center of the national economic policy-making that’s so important to the city’s financial-services economy. Senator Hillary Clinton reportedly could have key roles in the Armed Services or Environment and Public Works Committees.
In the House of Representatives, Jose Serrano will be in a strong position on the Appropriations Committee, and Jerrold Nadler may well have a chance to produce new funding for his metropolitan transportation projects.
True, the large federal deficit is likely to put a brake on much new federal spending. But there is one way that may offer the most immediate relief for New Yorkers, thanks to New York City Congressman Charles Rangel’s new chairmanship of the tax-writing House Ways and Means Committee.Rangel is likely to reform the federal alternative minimum tax, which was initially established to prevent very wealthy individuals from escaping the federal income tax, but now affects the middle class as well, according to an Independent Budget Office report.
In Albany â€“ School Funding And Property Taxes
At the state level, any city gains are much more problematical. Incoming Democratic Governor Eliot Spitzer will tackle at least two big policy issues that will affect New York City finances and city taxpayers â€“ settling the Campaign for Fiscal Equity school funding case and providing property tax relief across the state.
The city government, for instance, might well have to contribute a substantial share of new school costs, and it might well be shortchanged â€“ proportionately -- by any new state property tax relief program.
For instance, the Campaign for Fiscal Equity suggests a fair settlement of school funding inadequacies would ultimately cost nearly $9 billion a year state-wide. Furthermore, many expect City Hall will have to pay a fair share of that $9 billion. Mayor Michael Bloomberg has repeatedly rejected any such city share, but with huge city budget surpluses the past two years â€“ and a $2 billion surplus already recognized in this year’s budget â€“ the Bloomberg administration’s position is less tenable.
Spitzer’s property tax relief program, as cited during his campaign, is based on the state’s existing STAR program, which gives tax relief to homeowners. Since only a third of city residents are homeowners, the program has disproportionately aided non-city residents. According to the Independent Budget Office’s March 2006 report, city residents in the most recent fiscal year got only 24 percent of the $3.2 billion in state benefits.
Apparently in response to this inequity, the Spitzer program (which would cost nearly $3 billion in its first year), promises the city a new $250 million benefit for all income taxpayers, a sum that does not seem to fill much of the gap between non-city vs. city benefits. In any case, with the state senate still controlled by non-city Republicans, any Spitzer proposal that aids the city will likely have a tough legislative road to travel.
Glenn Pasanen, who teaches political science at Lehman College, has been in charge of Gotham Gazette's finance topic page since 2001.Â
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