The $75,000 Start
When Governor Weld first floated his proposal to eliminate the state income tax on those earning less than $75,000 a year, it met with a rough reception. This newspaper reported some of it in a front-page news article headlined "Tax Plan of Weld Is Called 'Perverse.'"
And it's true, the plan as outlined by Mr. Weld, who is running for the Republican nomination for governor, wasn't exactly what Steve Forbes, Lawrence Kudlow, Amity Shlaes, Milton Friedman, Jack Kemp, and Stephen Moore would have come up with if they were locked in a room for an afternoon and asked to fix taxes in New York State. Critics such as E.J. McMahon of the Manhattan Institute noted that, as described, the plan had a significant marriage penalty and would create a disincentive for those earning $74,000 tax-free to increase their income to $80,000, which would then be subject to a tax in its entirety.
It seemed, in other words, to confirm suspicions already rampant among conservatives that Mr. Weld was a Massachusetts liberal in Brooks Brothers clothing. But it seems to me that Mr. Weld may deserve more of the benefit of the doubt on this one than he has so far received.
Mr. Weld himself has been careful to leave some ambiguity in describing his plan. He says, "we should eliminate the personal income tax on the first $75,000 of income." That certainly leaves room - his press secretary's attempt at clarification in the other direction notwithstanding - for eliminating the state tax on the first $75,000 in income earned by everyone, including those who make more than $75,000.
Critics argue that everyone should pay some taxes as a simple matter of equity, so that those earning less than $75,000 don't forget that the services provided by the state cost money. But those earning less than $75,000 and living in New York would still be paying plenty of state sales tax. They pay fares on subways and buses and tolls on bridges owned by the Metropolitan Transportation Authority, which is part of the state. They buy lottery tickets, pay fees for state parks and hunting, face punitive, regressive excise on cigarettes, and shell out taxes on their cellular phones. Many of them don't pay much income tax to begin with - New York already has a state earned income tax credit.
As vague as Mr. Weld's proposal is - he himself still hasn't spelled out if and how it would apply to individuals earning more than $75,000, and how it would deal with the marriage penalty - the former governor of Massachusetts has still been more specific on taxes, and called for larger cuts, than any of the other candidates in the field. In a speech to the National Federation of Independent Business, Mr. Weld proposed limiting property taxes to 2.5% of total valuation and limiting growth in that tax to 2.5% a year. Property taxes are set at the local, not state, level, and in New York City are generally lower than in the suburbs because New York City has an income tax.
John Faso, the former minority leader in the Assembly, who is also running for governor as a Republican, has called for a cap on school property taxes, though he hasn't said what the cap should be. He's also been an enthusiastic supporter of Governor Pataki's proposed education tax credits. Randy Daniels, who served as secretary of state under Governor Pataki and who is also running for governor as a Republican, has written in these pages that "New York cannot afford higher taxes," but he has not detailed a plan for lowering them.
As for the Democrats, Mr. Weld charges that "Spitzer wants to create new taxes (or at least raise the old ones)." Neither Eliot Spitzer nor his primary opponent on the Democratic side, Thomas Suozzi, has offered detailed tax cutting plans, though Mr. Suozzi does claim, "I've made property tax relief a central focus of my campaign for governor."
One lesson of the 2000 presidential campaign and the federal tax cuts that followed is that it pays to be specific. George W. Bush campaigned on a specific tax cut platform and was able to have it enacted in part because he could claim a mandate from the voters.
A second lesson of the Bush tax cuts is that Democrats negotiate the tax cuts so that they are smaller and more geared at lower-income taxpayers. If that's going to happen anyway, it's an argument for campaigning Republicans to stake out large tax cuts that also offer tax relief to everyone, including higher-income taxpayers, if only so that the eventual inevitable compromise ends up closer to the right place.
A third lesson is that tax cuts create economic growth that creates political momentum for more tax cutting. Witness how Mr. Bush's income tax cuts were followed by cuts to taxes on dividends and capital gains. In his speech to the National Federation of Independent Business, Mr. Weld said, "When I was governor, we cut taxes 19 times. We reduced income, corporate, corporate excise, estate and sales taxes. We repealed sales taxes on services, and provided generous incentives for job creation. We even cut stealth taxes, such as government fees. The result: Massachusetts went from Taxachussetts to one of the most job friendly environments in the country."
The message is that if Mr. Weld is elected, it isn't going to be only those with incomes of $75,000 and below seeing tax relief. Mr. Weld could provide some reassurance on that front by stating it forthrightly instead of hiding behind his press secretary. If he does, don't bet against him. For there is another lesson from that 2000 Republican presidential primary -- the candidate in the closing stretch with the biggest tax cut plan is the one who wins.
