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How the Estate Tax Helps New York


As a state senator, I represent the district on the East Side of Manhattan that has traditionally been labeled the “Silk Stocking District” -- a reference to the affluence of many of my constituents. Thus it might surprise some that I oppose federal proposals to do away with the Estate Tax, the tax that collects money on estate whose worth exceeds $2 million. Ending this tax would be very bad not just for the country as a whole, but for New York City and for my own district.

New York City is home both to some of the greatest cultural, medical and charitable institutions in the world, as well as some of these institutions’ most generous philanthropic benefactors. My district alone is home to many of these institutions, including Baruch and Hunter Colleges, Marymount Manhattan, the Metropolitan Museum of Art, Guggenheim Museum, Central Park, NYU Medical Center, Mount Sinai and Sloan-Kettering. Without the estate tax, and the effects of the tax code on the wealthiest New Yorkers, nonprofit facilities in our city will not only find governmental funding cut, but charitable donations from the wealthiest donors also.

And some of the programs that could be affected by repeal of the tax helped people amass their wealth. Martin Rothenberg, who was raised in Brooklyn and who opposes the repeal of the tax despite his fortune, likes to point out that he grew up using the city’s public library, went to school on the GI Bill, received a government fellowship, and went on to build a $30 million software company using publicly funded research and publicly educated employees. He said, "I hope the taxes on my estate will help fund the kind of programs that benefited me and others from humble backgrounds."

The "Death Tax"?

Proponents of repealing the estate tax have effectively managed to nickname a nearly 100-year-old policy. They call it the "death tax" and they say it forces people to sell their small businesses and family farms instead of being able to pass it on to their heirs. They say this costs jobs. But saying it does not make it so.

The number of small business and family farms affected is tiny—about 2 percent of all eligible estates, of which there is just 8,300 in total.

Anti-estate tax lobbyists have implemented a strategy to mislead the public on who is affected, how much is collected, and what the loss of revenue would mean. Proponents of repealing the estate tax not only mislead the public, they also purposefully ignore what the tax does. For instance, it is expected to generate nearly $1 trillion in the next decade alone—a huge sum of money that helps sustain vital programs that serve many low and moderate income Americans, and senior citizens. Repeal proponents want to remove $1 trillion from public funds with no plan or strategy for how the government can recoup that loss without significant cuts to these vital programs.

But the effect of the cuts would go beyond the $1 trillion because eliminating the estate tax would also do away with incentives in the tax code that only the wealthiest are eligible for, which encourage them to make large charitable donations for their own financial benefit.

A Decrease in Donations

These tax code incentives benefit encourage the wealthiest to give money to a nonprofit (where they can select the sort of program they are helping) instead of letting the government take the money in the form of taxes and put it into general funds.

The Congressional Budget Office said in 2004, "In essence, lowering tax rates increases the price of donations, reducing the incentive to donate." The office reported that, had the estate tax not existed in 2000, charitable giving would have been 16 to 18 percent lower that year alone.

A more recent study by the Brookings Institution projected that repeal of the estate tax would result in a $10 billion reduction in annual charitable donations in life and in bequests at death. As a result, every year, the nonprofit sector would lose resources equivalent to all the grants currently made by the largest 110 foundations in the United States.

Research confirms that the estate tax encourages many of the most wealthy to donate more than they otherwise would, since they can reduce their estate tax liability by making donations while they are alive and in bequest.

The Drive for Repeal

While so far, each attempt to completely repeal the estate tax has failed, if history has been any indicator, the most recent attempt will not be the last. A recent Bloomberg News Service article titled "Estate-Tax Repeal Keeps Charities Silent, Deferring to Donors” describes efforts to repeal the estate tax as a "dilemma facing charities, universities, museums and other organizations that rely on donations as Senate Republicans consider another vote…as early as next week."

Nearly six in ten Americans favor preserving the estate tax and the significant economic benefits it provides, yet at this moment attempts are being made in Washington and in states like Virginia to repeal the estate tax by combining the legislation that would do away with it with more popular measures that many elected officials feel compelled to vote for.

Unwilling to accept defeat, the repeal movement will continue to intensify as it has been funded by just 18 of the richest families in the country, who have already spent in excess of $200 million on political campaigns and lobbyists. These 18 families have financed an anti-estate-tax coalition whose mission is to mislead the public, and manipulate virtues like American’s entrepreneurial spirit, for their personal gain.

Support for the Tax

But many of the national’s wealthiest people, like Martin Rothenberg, support the estate tax. They have formed an organization called Responsible Wealth.

"It is a very equitable tax," declared Warren Buffet. "It's in keeping with the idea of equality of opportunity in this country – not giving incredible head starts to certain people who were very selective about the womb from which they emerged."

Buffet made these comments shortly after donating $30.7 billion to charity, and he is right (though it is important to recognize that even with the estate tax, the size of inheritance to those who descend from the richest 8,300 American families remains a rather incredible head start).

The increased concentration of wealth, and disparity between the vast majority of Americans and the very wealthiest will have dire effects on economic viability of New York and the country. It was New York's own, President Teddy Roosevelt, who introduced the estate tax, saying "Inherited economic power is as inconsistent with the ideals of this generation as inherited political power was inconsistent with the ideals of a generation which established our government."

The economic implications of permanent repeal of the estate tax are far-reaching, and potentially devastating to the health of our great nonprofit institutions, as well as the already neglected infrastructures of New York City, State, and the country as a whole.

Liz Krueger, a Democrat, represents Manhattan’s East Side in the State Senate.

 

Bringing the Money Back from Albany


New York State Senate-District 13:

The Candidates

• John D. Sabini, New York Sate Senate

• Hiram Monserrate, New York City Councilman, 21st District, Queens

Other Races

• New York State Assembly- District 21: Ethnic Politics in Changing Flushing
• New York State Assembly- District 57: Succeeding Green in Fort Greene – and Beyond


• New York State Senate-District 20: Debating Health, Education, Reform and, Yes, Atlantic Yards, in Central Brooklyn

• New York State Senate-District 24: Democrats Move in on Staten Island's Republican South Shore

The 13th Senate District in Queens was drawn after the 2000 census to create a Latino majority seat, but the first person elected to represent the district was John Sabini, a man of Italian descent.

“Some people tell you that it’s a Latino district, and we should have a Latino legislator. I believe it’s a diverse district, and people should be given an opportunity to choose who they want.”

Sabini is facing a strong challenger in Hiram Monserrate, Queen's first Latino city council member, a rare test of an incumbent in Albany.

Some have pointed Monserrate's Latino background as a particular strength in the diverse district encompassing Corona, Jackson Heights, and East Elmhurst, with a population that is slightly over half Latino. He has raised $177,000 through the end of July, outpacing Sabini, who has raised $143,000.

Monserrate acknowledged that historically New Yorkers have tended to vote along racial lines, but insists that that is not why he is running. Nor does he have major philosophical difference with Sabini.

“We have one of the most underserved communities," said Monserrate. "We need more resources, and we need someone who is going to go to Albany and bring those resources back. [Sabini] hasn’t done that.”

Sabini, however, maintains that he has delivered a solid performance as State Senator. “We gave a record we are proud of, and we are eager to get it out,” he said.

HEALTH CARE

Both candidates agree that health care is one of the major challenges that their district faces, as the district has a large immigrant population and particularly high incidences of diabetes, tuberculosis, and HIV. As State Senator, Sabini has provided free testing and free referrals for cancer, Alzheimer’s disease, hearing loss, and a number of other health conditions. In addition to expanding existing programs, he intends to provide community education programs about healthy living.

Monserrate, however, feels that Sabini is not securing enough funding from Albany for health care. As City Councilman, Monserrate has increased healthcare funding, providing funds for a new emergency room for Elmhurst Hospital, $1 million for a preventive infectious disease clinic, and $600,000 for a mobile mammography unit. Monserrate brought experts from Albany to explain recent changes to Medicare in different languages. He stresses the need to provide community education about the importance of healthy eating, annual checkups, and preventive care.

EDUCATION

Sabini, who is on the education committee in the Senate, has voted against every piece of the state education budget this year, because he believes that it does not provide adequate funding for underperforming schools, as required by the Campaign for Fiscal Equity. As State Senator, Sabini has obtained funds for 10,000 new school seats in the area, and has also led in the creation of a law that prohibits required state high stakes testing on religious holidays.

Monserrate believes that closing the digital divide is one of the most important areas of education reform. He plans to continue investing millions of dollars to continue upgrading the technology of local schools and to create computer labs throughout the district. He also stresses the importance of parental involvement in student education, a feat that is particularly difficult for parents who do not speak English. To increase facilitate such involvement, he fought for changes in Department of Education regulations to provide translation services for parents in the top eight languages, other than English, in New York City.

SMALL BUSINESS

The Queens district is home to many small businesses and many entrepreneurs, and both candidates emphasize the need to provide support for small business owners. Sabini is focusing on expanding opportunities for women and minorities in business. He also is fighting to assist the restaurant and hospitality industry, which he argues have been hurt by the city's indoor smoking ban, and to support businesses in Woodside affected by the 2006 blackout, through low or no interest loans and restitution from Con Edison.

Monserrate emphasizes the need to promote “an atmosphere that doesn’t just benefit major corporate entities, but also small businesses.” For example, he challenged the New York Mets stadium proposal, which he felt originally did not provide adequate benefits or promise of employment to the community. The deal was then modified to include increased community benefits, jobs for Queens residents, and opportunities for women and minority owned businesses.

TRANSPORTATION

In regard to transportation, both candidates agreed in the need for a restructuring of the MTA, which has been challenged for illegal financial practices in recent years. Sabini felt such problems should be remedied by increased fiscal accountability on behalf of the MTA and other authorities, such as the Dormitory Authority and the Empire State Development Authority. Monserrate emphasized the need to increase local control of the MTA, so that more subway decisions could be made by the people who use the subway on a daily basis.

REFORMING ALBANY

Sabini has emphasized the need to “fight for change in the structure of the way Albany has done business." He believes that party loyalty and a failure of the Assembly and the Senate to work together leads to inefficiency. He believes that the main change needed is increased oversight of committees, through adoption of a system similar to that of the New York City Council. He also advocates restrictions on the governor’s power to evoke messages of necessity, which allow the governor to bring a bill to immediate vote, forgoing the usual three day minimum waiting period. Some say this allows bills to avoid public scrutiny and be used as a part of the “gamesmanship” of last-minute deal-making.

Also believing the State Senate needs reform, Monserrate emphasizes the need to eliminate the Senate Majority Leader’s power to “star” a bill, thus unilaterally blocking floor action on it.

In addition, Monserrate advocates reform in the way the Senate disperses funds, which he believes is “at the detriment of New York [City], and is “unacceptable and illegal.” He felt that Sabini had failed to adequately address the issue of the distribution of funds, and that district residents have suffered as a result.

Both candidates criticize the current system of campaign fundraising and would like to see it replaced with public funding of elections. Monserrate said that New York City has a very good campaign financing system that could serve as a model for the state. Sabini concurred, saying “the influence of money in politics should be minimized.”

 

Summer Jobs


Growing up in Brooklyn, Jason DePont had what seemed like a modest goal.

“I just wanted a job. I always wanted to work,” said the native of Spring Creek Gardens, a public housing project in East New York. “I thought it was the coolest thing.”

DePont’s first job came in the summer when he was just 14, working as a camp counselor nearby. The next year, he held a clerical position at a local non-profit group. This year DePont, now 18, is a paid summer intern at advertising company Mediaedge:CIA. All of these summer jobs came through the city’s Summer Youth Employment Program, which this year found positions for 42,000 New Yorkers between the ages of 14 and 21. [For a look at other ways New York's teenagers are making productive use of the summers see our related article: Teen Activists]

The youth employment program cannot keep pace with demand, however – 30,000 applicants were turned away this summer because the city couldn't afford to accommodate them. Many New York teenagers were probably not able to find work independently, say labor market experts. This is not just about what kids do this summer, say advocates, but whether they learn to be successful in the world of work. Many argue that programs that find summer jobs for teenagers should be seen as part of a larger anti-poverty strategy. The city may be particularly receptive to such arguments now, as Mayor Michael Bloomberg has appointed a commission on poverty which he says will draft such a comprehensive policy, releasing policy recommendations next month.

Subsidized summer programs have been on shaky ground since 1998, when the federal government decided to cut drastically the money it gave to summer jobs programs, opting instead to fund year-round jobs programs that it believed would yield better results. New York City is one of a few places where local officials have tried to fill the gap. In the last several years, the city has been working to provide a more stable stream of money to the program and to address concerns that many of the jobs are simply “make work” positions – cash assistance by another name.

“We don’t want them to always be dependent on a public jobs program,” said Jeanne Mullgrav, commissioner of the Department of Youth and Community Development, which runs the program. “We want them to have the skills to take their resume, market [themselves], and be employable.”

DePont, whose East New York neighborhood is known for high levels of unemployment – and the poverty and crime that come with it – believes he is on his way. He is not sure to where, of course. In the course of a half hour, he says he would like to be a cook, an actor, and a social worker. He wants to work in an office, but never be “stuck” there, and he wants a job that never makes him wake up early. His real goal, though, is to get away from a place where he feels that most of his peers are “beyond help.” He says the answer will be some sort of job.

“That actually does exist out there,” he said. “I’d like to find it.”

TEENAGERS AND JOBS

When Katherine Newman went to study teenaged employees of fast food restaurants in Harlem, she expected to profile kids who were forced to choose between work and school.

But "school and work weren't antithetical to one another," said Newman, whose book No Shame in My Game documents her findings. "Young people who were working were doing better in school than the young people who weren’t, because the discipline that they learned on the job and the oversight the business owners and mangers exercised over them was having a positive effect on their school performance."

The benefits of working while in high school extend beyond graduation, according to Andy Sum of the Center for Labor Market Studies at Northeastern University.

“Your earnings in your mid 20s are very much influenced by how much work you did all the way from the time you were 16,” he said. “The effects are even stronger for kids who don’t go on to a four year college.”

For many teenagers, though, the problem is finding a job. In recent years the percentage of teenagers who are working has dropped to a 50-year low. Teenagers in big cities are more likely to have to compete with older workers or immigrants who, to employers, seem like more stable prospects. The prospects are the worst for teenagers from low-income families, who have access to only the weakest labor markets.

The stakes are quite high, said Mark Levitan of the Community Service Society, author of a report on the 170,000 "disconnected youth", 6 to 24 year old New Yorkers who are no longer in school but have not found jobs.

THE SUMMER YOUTH EMPLOYMENT PROGRAM

Since its inception as part of Lyndon Johnson’s War on Poverty, the Summer Youth Employment Program has been seen as a way to help teenagers find jobs, acknowledging that many would be unable to do so on their own. In New York, the city signs contracts with agencies that locate employment opportunities for participating teenagers. Most jobs are with non-profit groups, but there are also opportunities with government agencies or with private employers. The program pays participants the minimum wage with public money, and guarantees them employment. The employers get free labor, and 42,000 teenagers get jobs.

Montefiore Community Center in the Bronx is one of the biggest agencies in the program, placing 2,100 kids with various employers. Participants work with hospitals, local retailers, and other employers. They also serve as counselors at after school programs for younger children enrolled in summer school that would be unavailable otherwise and staff the community center itself.

“Their help is definitely needed,” said Debra Fort, who supervises 50 summer youth employees who serve meals to senior citizens, help with maintenance work, and generally assist those running the community center in the northern Bronx.

Fort acknowledges that not all of the kids she supervises are learning skills that could be applied directly to another job. But they are, she said, learning about the world of work. For many, this is their first experience at a place with a dress code – the center is full of kids wearing bright white Summer Youth Employment Program t-shirts – and the first time they have to show up to a job site each day. Fort also teaches them how to fill out resumes and applications.

Some critics have questioned the value of such programs, though. Summer jobs programs have been described as simply creating “make-work” positions that won't serve to transition kids into regular jobs as they get older. This was the rationale given when the federal government essentially stopped funding summer programs as part of the Workforce Investment Act of 1998, favoring year round programs that it believed would be more effective – but would serve fewer kids – instead.

In the first year the law was in place, federal funding for New York’s program fell from $44 million to $15 million, forcing the city to eliminate almost 10,000 jobs. It now gets about $5 million. Other places, faced with the loss of federal funding, began to scale back their summer jobs program – or eliminate them entirely. But New York officials tried to protect the program from cuts, while also continuing to address concerns about the value of the jobs themselves.

Backers of the program do say that make-work jobs are a concern, but also argue that many menial-seeming jobs often give teenagers experiences that help them move towards more fulfilling work later in life.

There has never been a study of how participants of the program fare over the long-term, but many of its strongest advocates had their first experience with the program as participants. Commissioner Mullgrav worked at the Arsenal in Central Park when she was a teenager, and four of six members of the council’s youth services committee also participated in the program, including its chair, Lew Fidler. When advocates traveled to Albany for a lobbying day, former participant Andre Harrell, the former CEO of Motown records, went along.

Since the city’s Department of Youth and Community Development took over the program in 2003, it has added an educational component to the jobs program, ensuring that every participant receives lessons on how taxes work, how resumes are written, and other such skills throughout the summer.

The city has also tried to place teenagers in jobs where they will be able to build connections that might land them regular jobs. The proportion of summer jobs in the private sector has increased from 10 percent in 2004 to 18 percent now. Some employers, including JP Morgan Chase and the Staten Island Yankees, have opted to keep participants to stay on beyond the end of the program in late August. Some employers, like the Door, a community center in lower Manhattan, have created career placement centers, which moves kids that work on its radio programs in the summer into internships with media companies in the fall, or landing teenagers who work in the kitchen jobs at fancy restaurants.

This year, the city also created a program called CAPITAL, where private companies agree to hire participants recommended by agencies who have already worked with them. The companies pay the salaries of CAPITAL participants themselves. – giving a small amount of relief to a program that has long been faced with having more people who want to participate than money it has to pay them.

MONEY MATTERS

With the city and state committed to continuing to provide summer jobs, there is little debate over the value of its program – the issue going forward has to do with its price.

In order to continue the program at its current levels, city and state officials have been left to fill a large gap left by the federal government. In 1999, Washington provided 80 percent of the funding; city tax dollars now make up more than half of the program’s budget. Meanwhile, the cost of each job is rising with the minimum wage.

New York has almost tripled the amount of money it puts into the summer jobs program, from $10 million in 1999 to $27 million today. But while it has been given a steadily larger allotment of city tax dollars, the program has also been subjected to the vagaries of the “budget dance,” where the mayor proposes cutting programs in order to have bargaining chips in budget negotiations with the City Council. Because planning for the jobs program starts before the budget is settled, this practice has proved burdensome for those running it.

Last year, though, Mayor Michael Bloomberg provided the program with over $17 million in permanent funding – a process called baselining. This year, the city added another $9 million, bringing the total to about $26 million. Council Speaker Christine Quinn, who has made ending the budget dance a major issue, counted the additional baselining as one of her primary budget victories.

Agencies that work with the city agree that the permanent funding is a significant achievement.

“It’s very hard for a contactor to organize when they’re not really sure about the numbers,” said Bob Altman of the Montefiore Community Center. “This way, now we know that a lot of the money will be there, so we can plan ahead.”

In Albany, however, the program is still regularly excluded from the governor’s budget, only to be restored by the legislature. While funding has been restored each year, the dance can prove harmful. In 2004 the budget was passed so late that money that had been approved couldn’t be used, costing $6 million and some 3,00 0 jobs.

Advocates and city officials hope that the new governor will bring reform – and stability.

“Any time you have programs which are in part funded by the city and in part funded by the state or the feds, it’s a tenuous situation,” said Speaker Quinn on a recent visit to a summer job work site. “I think we’re certainly going to be seeing changes in how things happen in Albany come next year, and I anticipate that those will be extraordinarily helpful.”

 



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