New York State is suffering in the wake of the recent financial meltdown. Really suffering. But fortunately for the residents of New York, their state government puts fairness first. Gov. David Patterson has just proposed an unprecedented plan for taking the financial misery of Wall Street brokerage and banking firms and spreading it evenly to everyone in his state.
In order to make up for a projected $15.4 billion budget shortfall, Gov. Patterson is proposing over 80 new taxes and fees, including taxes on digital music and entertainment downloads (a so-calld “IPod tax”), a 15% “fat tax” on soda pop and all “sugary” drinks containing less than 70% fruit juice (parents know this will include virtually every kid’s drink on the market), increased liquor taxes, a $.50 cent per cigar tax, a repeal of the 8% per gallon cap on motor fuel taxes, new sales taxes for movie theaters, sporting events, taxis, buses, limousines and cable and satellite TV and radio, and on and on. Patterson also wants more video slot machines at Belmont Park, more state lottery games, an increased luxury item tax, higher state college tuition, bigger state fees, and increased state fines.
And get this — virtually all of the money raised by these new taxes and fees rate hikes will be used to cover the projected multi-billion dollar revenue loss that the state expects as a result of the evaporation of profits and bonuses from Wall Street.
Woah! Hold on there — I thought “Trickle Down Economics Doesn’t Work!”®.
If you’ve fallen for that infamous bit of Democratic Party propaganda, then you should check out this AP story from almost exactly one year ago: Wall Street Bonuses Flood NYC’s Economy:
When Michael Aaron learned that Wall Street investment banks were going to be shelling out record bonuses this holiday season, the savvy wine merchant uncorked his own plan to make serious dough.
He paid for a double-page advertisement in The New York Times, boasting a rare bottle of 1995 Dom Perignon. The price tag–$14,950.
“We thought we’d put this temptation out there,” said Aaron, chairman of Sherry-Lehmann wine store on Madison Avenue.
The $15,000 bottle of bubbly is just one example of how record Wall Street bonuses this year can trickle through New York City’s economy. People are buying multimillion-dollar apartments. They are driving $40,000 BMWs out of the showroom.
A report released Tuesday by the state comptroller said Wall Street is expected to pay out $23.9 billion in bonuses, shattering last year’s record by 17 percent.
The impact of such bonuses on the New York economy is profound.
Bonuses are expected to generate $1.6 billion in tax revenues for New York state and another $500 million for New York City. For every job created on Wall Street, three other jobs are created in the city and suburbs.
“Wall Street jobs create jobs,” said Ken Bleiwas, deputy comptroller. “Why? Because they are pumping money into the economy. They’re going out to restaurants, they are purchasing all kinds of consumer goods.”
“When Wall Street does well, New York City and New York state do well,” Comptroller Alan Hevesi said. “Wall Street bonuses are spent in the city and in surrounding suburbs on entertainment, real estate, automobiles, and other consumer goods, all of which generates jobs and tax revenues.”
Ladies and gentlemen, welcome to Supply Side Economics 101 — more money in the private sector means more money spent by the private sector, which results in accelerated economic growth, thereby increasing tax revenues. Even though tax rates are lowered as a primary economic stimulus, the resulting economic growth always results in a net increase in the overall amount of revenues collected. The more money people spend, the more goods and services they need, which keeps people in the manufacturing and service industries working. The more money people earn, the more they pay in taxes, which keeps government coffers full, and allows the government to offer better quality services to the economically disadvantaged.
It’s all just common sense, really.
Not too long ago, I heard a talk radio host ask an interesting question — how many big businesses, if they were not forced by some sort of convention to headquarter themselves in New York City, would move out of there in a heartbeat if given the chance?
Perhaps we’ll discover the answer in the next few years.
Liberals like to point out that even during times of prosperity, there are many who don’t prosper, and seems as though they delight in portraying Republicans as the arch-villains responsible for exploiting as many gullible people as possible in order to enrich a select few. I am already wincing in anticipation of some newspaper columnist or Ivy League talking head officially declaring the first decade of the 21st century to be the “new decade of greed,” conveniently ignoring the stock market hyjinx and accounting shenanigans of the late 1990’s that provided the foundation for the expectations and attitudes that drove the real estate and mortgage frenzy of the past few years.
It is certainly true that wealth was not equally distributed in Manhattan. In light of the current market-wide financial slump, and the huge losses that average Americans have been forced to absorb, the eight-figure executive bonuses paid in recent years by firms like Goldman Sachs, Bear Sterns, Lehman Brothers, and other major financial institutions seem grossly out of touch with reality. Even the best and brightest among us can succumb to the temptations of money and power, and when their schemes implode, the results can be devastating. Just ask Bernie Madoff’s clients.
But we should be careful not to let aberrations cloud the truth of basic economics. Although we often despise the wealthy, they are not universal villains. In fact, they are the backbone of our economy. We should remember this simple fact as we watch the government of New York try to endlessly “nickle and dime” all of its citizens, just so it can survive.