The Surplus Problem

Once again, New York City is set to finish the year with a hefty budget surplus, and this time, says a report just out from the city's Independent Budget Office, the surplus will be $2.2 billion. It's high time, then, that City Hall lawmakers put the checkbook away and consider giving money back to the New Yorkers from whom they take it. The way to do this and set the stage for great growth in revenues is with a reduction of the tax rate on the margin.

Excessive surpluses in the city budget are becoming a pattern. In five out of the last six fiscal years, the city finished with a surplus well in the billions, according to Doug Turetsky at the Independent Budget Office. City Hall's response to a surplus takes a predictable pattern as well: either find some new way to spend it, or save it for a "rainy day," which is a way of saying they will find some new way to spend it. Meanwhile, tax revenue has been going up, not because taxes are being raised, but because New Yorkers are working hard and business here is booming.

An across-the-board tax cut on the next dollar earned makes sense because it will stimulate New Yorkers to work more, to buy and invest more, and to keep business booming. So even though the IBO report is cautiously projecting an economic slowdown in the near future — and therefore recommending that rainy-day option mentioned earlier — there's no reason to believe New York City's humming business growth can't continue to defy projections as it has in the last few years, especially if the city gives its taxpayers a measure of relief in the form of a tax cut they would spend in the city's businesses.

Some New York City Council members are moving more or less in the right direction. Michael McMahon, a Democrat representing Staten Island, has proposed a 10% cut in taxes on property. The only cut on tap at the mayor's office is an extension of his 2004 property tax rebate. Slashing excise on cigarettes would also be a good move if one wants to help the poor, who pay these taxes. But none of those courses would be as logical as attacking income taxes — both business and personal — at the top margin. In a city whose government has forced its residents to pay up an astounding $17.2 billion in extra taxes during this decade alone, it's an outrage to require them to pay taxes for a surplus.