Blair Horner: It Looks Like Big Cuts To The State Budget, But Who Should Pay?
As the nation struggles to deal with the COVID pandemic, it's clear that "essential workers" are carrying the load on behalf of the rest of us. Our health care workers and first responders often have to deal with incredibly sick and contagious people; others considered "essential" have to continue to go to work to keep our transit systems running, lights on and grocery store shelves stocked, even if it means potential life-threatening exposure. Many of us continue to work, but from the relative safety of our residences.
The vast majority of these "essential workers" are not wealthy and often rely on government services to get along, most notably relying on kindergarten through high school education to provide a safe space for their children.
New York State policymakers have been grappling with the economic fallout of the pandemic and the state and local governments’ growing structural fiscal deficits. As part of the state budget agreement last month, Governor Cuomo and the Legislature agreed to grant the governor vast authority to make cuts to the agreed-to budget if revenues cratered, which they have. Recently, the governor's office released a blueprint for the cuts that are being contemplated -- and if implemented will go into effect soon.
Albany had been hoping for a bailout from the federal government to offset -- or eliminate -- the current fiscal year deficit estimated to run between $10 and $15 billion. So far, no bailout.
The governor's office may very soon make decisions to cut programs and the programs likely to face the biggest cuts come in the area of education -- precisely one of the services that "essential workers" rely on most for their school-aged children.
The governor's financial plan proposes a 10 percent cut in state agencies budgets, and over $8 billion in cuts to programs including K-12 education, college aid, transportation and health care.
At a time when the burdens and risks of the pandemic are not being shared equally, why should those currently bearing the biggest load of keeping society together take the biggest budgetary hit? They shouldn't.
Instead those who have been least affected, those with the most means, should pony up even if it means that they contribute more than their share of the costs of closing budget deficits.
One obvious measure to consider is for the state to start collecting the "stock transfer tax." Originally enacted over 100 years ago, New York has a tax on the books that assesses a tiny fee for each stock transaction. What amounts to pennies on the dollar for each Wall Street stock transfer has the potential to amount to billions of dollars in revenue for New York State.
Starting in the 1980s, the state started rebating that tax back to Wall Street. It still collected the tax, but gave it immediately back to investors. You heard that right: The tax collected on stock purchases and sales is collected by the state and then given back.
For most investors, this is an unseen tax -- even if it was collected. Most people who have investments generally are not buying and selling stocks with great frequency. Wall Street speculators, on the other hard, seek to jump in and out of investments at a rapid pace and those would be the people who would pay the tax. Largely very wealthy investors.
Given the gravity of the state's budgetary situation, why doesn't the state "turn on" the tax? There is fear that Wall Street -- an economic engine of New York -- might pull up its Manhattan operations and move elsewhere.
But would they?
There are other places with sophisticated stock markets that already have a stock transfer tax. Places like London and Singapore, to name two.
There doesn't seem to be any evidence that those markets have been harmed, although there is some information that may mean that their high frequency stock market "speculation" trading slows, which is probably a good thing.
As Governor Cuomo and the legislative leaders look to address financial shortfalls, they should remember that there is a tax that is ready to go. A tax that asks for a contribution from those who benefit most in society and are affected least by the state's financial shortfalls and health threats. It's time to "turn on" the stock transfer tax.
Blair Horner is executive director of the New York Public Interest Research Group.
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