New York City has careened from budget crisis to budget crisis for decades. Each crisis has led to a ratcheting up of taxes and reduced economic freedom for New Yorkers. As an entrepreneur, Mayor Michael Bloomberg might have brought innovative changes to the city’s fiscal policies, but he has pursued anti-growth tax increases that the city cannot afford in the increasingly competitive global economy.
New Yorkers have faced increases in property taxes, income taxes, sales taxes, and tobacco taxes under Bloomberg. The mayor argued that tax hikes were needed to balance the budget. But the mayor’s latest projections show that a large budget gap will open again in fiscal year 2006. Clearly, recent large tax hikes have not solved the city’s deficit problem, yet some officials are already pointing to the future budget gap as an excuse for further tax increases.
Bloomberg’s higher taxes have not solved the budget problem because they have fueled higher government spending. That effect is evident in recent budget revisions. Higher Wall Street profits and other factors caused FY04 revenues to be revised upwards by $791 million. Not coincidentally, the new budget estimates include spending for FY04 that will be $800 million above the previously budgeted level.
Between FY94 and FY04, New York’s general fund spending increased 53 percent. High spending left the city with a debt load of $5,083 per capita at the end of FY02. That compares to an average of $2,262 per capita for 14 major cities surveyed by the New York City Comptroller’s Office.
New York needs to downsize its government to cut the city’s high tax and debt loads. Some city services should be contracted out to the private sector to save money and improve quality. Other services, should be privatized. The city workforce should be shaken up to cut costs and increase taxpayer value. New Yorkers need to press their elected officials to begin cutting spending to close the FY06 budget gap before the mayor claims that taxes need to be increased once again.
Budget cuts represent a formidable challenge for New York policymakers but are necessary if the city wants to reestablish itself as a leading center of growth and opportunity in America. The city can no longer coast on its impressive business history and must cut taxes to attract new employers. Mayor Bloomberg and other officials need to find creative ways to downsize the budget to increase private investment in the city and the economic freedom of New Yorkers.