Category Archives: state tax burden

Medicaid: The Rest of New York State (Re) Declares War on New York City

After the 1994 election, the one that saw the Republicans take Congress after decades of Democratic dominance, the New York Times published a “portrait of the electorate” based on exit polls. It showed that the 1960s generation was the one most likely to vote Republican that year. “Those hypocrites” I thought. They were “liberals” in their youth when they wanted to get out of serving in Vietnam, and now they are “small government” “conservatives” when they are at their earnings peak and they don’t want to pay taxes, but I’ll bet they’ll be “liberals” again when its time to collect on federal old age benefits. But they surprised me by being even worse than I thought. They still want even more tax cuts for themselves, and even more old age benefits for themselves, such as the Medicare prescription drug benefit. They want to borrow to pay for it. And to ensure our foreign creditors that the money will be paid back by someone else, they also want deep cuts in public services that younger generations need now, and drastic reductions old age benefits — not for themselves but for those to follow them – effective in the future.

With their aging, stagnant populations, the Downstate Suburbs and Upstate New York are now disproportionately occupied by, and almost exclusively represented by, members of Generation Greed. And back in the 1990s I had similar thoughts about their possible upcoming hypocrisy with regard to Medicaid funding, and specifically the local taxpayer share of it. But once again I’ve been surprised, because once again my cynicism was insufficient. They are even worse people than I thought. And it’s past time from them to be called to account for it.

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Education: Census Bureau Government Finances Data for FY 2004 and FY 2014

For the United States and most parts of it, the decade from FY 2004 to FY 2014 saw soaring public employee retirement costs, and weak growth for taxpayer income. In response to these trends state government assistance for public elementary and secondary schools fell relative to the income of all state residents, and total spending on public schools fell as a share of everyone’s income as well. But there was an offsetting factor. School enrollment fell as a share of the total population, and in many cases in absolute numbers, as the very large “Baby Boom Echo (Gen Y, Millennials) Generation exited school with smaller generations behind them.

At the same time, and perhaps driven by the same demographic shifts, state and local government spending on public higher education increased when measured per $1,000 of everyone’s personal income. But how did different states compare, and how was per-student elementary and secondary school spending affected? That is the subject of this post.

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State and Local Taxes in FY 2004 and 2014: Census Bureau Data

When measured as a percent of state residents’ personal income, the combined state and local government tax burden of New York State and, in particular, New York City is uniquely high compared with other states. Reputedly high-tax states such as Massachusetts, New Jersey, Connecticut and California aren’t even close. The only states where the tax burden is higher than, or even close to, New York are large, low-population states with extensive tax revenues from oil, gas, or other mineral production: Alaska, Wyoming, and more recently North Dakota, where a “fracking” boom has given way to bust. In these states residents and other businesses pay little in taxes – in Alaska they actually get checks. The Census Bureau data for FY 2004 to FY 2014 shows New York’s tax burden rising further, even as the average U.S. state and local tax burden remained close to 10 percent of personal income, about where it has been for decades. And yet all one hears in New York’s media is demands for still higher funding, and higher taxes, and higher staffing, and higher pay, and richer pensions made by New York’s public employee unions and the politicians they control, particularly in those in the New York State Legislature.

While the U.S. average is stable, the data shows a divergence among states. In many other states with above average state and local tax burdens in FY 2004, those burdens also increased further by FY 2014. And in many states where the tax burden was already below average in FY 2004 it fell even further, even in the face of soaring pension costs that have pressured state and local government budgets throughout the country. In several Midwestern states – Wisconsin, Ohio, and Michigan – the tax burden fell from somewhat above average as a percent of income to average or somewhat below, despite weak per capita income growth. In these aging states, public spending on seniors is rising, not only through federal programs that our current President has promised to protect (and his party has promised to protect for current beneficiaries but not younger generations), but also for the pensions and benefits of retired public employees. So the shrinking tax burden just adds to the downward pressure on other state and local government services, which benefit other age groups.   What do those three states, plus Pennsylvania which has a below average tax burden despite soaring pension costs, have in common? A spreadsheets, further commentary and charts follow.

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