Fifty-four percent of registered voters pay no taxes in New York City, according to a new study by Liberty Tree of America. This means that taxpayers who paying the highest taxes in the nation have no effective voice in governance. This toxic structural bias against taxpayers has resulted in an outright revolt that will result in a calamity unless steps are taken immediately to restore taxpayer confidence.

An anti-taxpayer attitude is rampant among NYC elected officials because they know they will suffer no penalty for it and, in fact, will be rewarded for it. The dirty little secret revealed by the Liberty Tree study is that candidates for office in NYC do not need taxpayers to get elected. In a tyranny reminiscent of British King George III’s reign in the 1770’s, NYC just wants a blank check from taxpayers to pay for the social programs they promise to those that actually matter to politicians in an election – the people who have the votes to elect them. It’s clear that they work for the expense side of the NYC budget – not the funding side. This toxic tax-governance structure explains a lot. Now it’s clear why the Mayor rewards municipal unions with pay increases well above the inflation rate and with excessive benefits valued at about $120 billion dollars and expands social programs at the cost of billions more. His voters want those things and most are not paying for any of it.

NYC taxpayers are tired of being abused. Over 300,000 taxpayers have left the City in 2020, according to reporting by the New York Post. That represents 12% of the City’s 2.6 million taxpayers. This qualifies as a full-scale revolt since taxpayers have the ultimate vote – which is to leave. The only major city to suffer an equivalent loss of taxpayers in modern times is Detroit and they went bankrupt in July 2013, six-months before NYC Mayor DeBlasio took office. Detroit’s bankruptcy was the societal equivalent of a neutron bomb causing massive damage to all residents regardless of socio-economic background. It’s apparent that Mayor DeBlasio learned nothing from the Detroit bankruptcy because he has continued with policies and political rhetoric which is anti-taxpayer.

Tax the rich more so they pay their “fair share” has become the mantra among NYC politicians. DeBlasio and Public Advocate Williams have advocated for increasing the already high taxes on high income taxpayers. This is a dangerous approach in a City where less than 2% of taxpayers fund nearly half the City budget and have the wherewithal to could move to a low tax jurisdiction in a day. And what would be their “fair share”? These politicians never say. Could it be when those 2% pay for 99.9% of all city funding.

How to Save NYC

NYC Leaders are hoping that Pelosi and a Biden Administration will provide a back-door bail out to the City by blaming all the City’s financial problems on Covid. That’s a risky bet because the Senate is likely to be controlled by Republicans, and even many Democrat Senators object to nationalizing the City’s debt, which was unsustainable even before Covid. Washington rejected NYC’s bailout request in the last financial crisis of the 1970’s and will do so again unless real reforms are instituted. It appears the City’s leaders don’t seem to have any real backup plan.

Reforms are needed immediately to prevent a disaster in NYC and to ensure there is never a third post-war financial crisis. The first crisis occurred in the 1970s and the request for a federal bailout at that time was denied because the feds were not convinced the City would make reforms that would turn things around. In hindsight, they were right.

A plan to restore confidence has been proposed by the Union of Taxpayers, New York Chapter. Union of Taxpayers was formed by taxpayers who realized that in many jurisdictions, like New York and Chicago, elected officials do not effectively work for taxpayers – they work for special interests that get them elected. It’s clear than no one taxpayer can change anything. By uniting taxpayers, the Union hopes to restore the country’s founding principle of “no taxation without representation.” The NY Chapter is the voice of over 1 million NYC taxpayers. All NYC taxpayers are encouraged to join as a member because when millions of taxpayers join together – their voice cannot be muted and their liberty cannot be stolen.

Any solution to the NYC financial crisis will involve taxpayer sacrifices and the Union intends to ensure that taxpayers have a true advocate sitting at the table so that they receive something in return. The Union takes an aggressively active role – as opposed to other organizations that are content with simply writing research reports.

The Union has called for changes to NYC’s tax and governance structure. The goal is to achieve long-lasting financial stability by restoring confidence to taxpayers, bond investors and federal funding sources. The key is to give taxpayers a say in budget and financing decisions. It requires a Taxpayer-Oversight Board (TOB) with the power to veto budget and financing proposals.

The TOB would work much like the Financial Control Board that was established during the last financial crisis. The key difference is that the TOB will be composed of actual NYC taxpayers who reside in NYC whereas the Financial Control Board is controlled by Albany. TOB members would be selected from a pool of taxpayers the same way jurors are selected, thereby removing politics from the selection process. The number selected would be sufficient to provide, statistically, at least 95% confidence that their decisions reflect those of fellow taxpayers.  Only when those directly affected by NYC finances – the taxpayers – are involved in budget and finance decisions will there be long lasting financial stability and real accountability.

Two Paths to a Taxpayer-Oversight Board

There are two ways to establish the TOB. One is for 30,000 NYC residents to sign a petition to amend the City Charter. The petition can be signed online at their website’s Petition Page. Signatures are only valid if they include a New York City address. Once the petition is certified by the clerk, it will be subject to a referendum. This whole process would take 11 months. A faster way is for the Governor to revise the NYC Financial Control Board so that its members are all NYC taxpayers using the same selection process as is proposed for the TOB. If the governor really wants Federal funding and to stop the loss of taxpayers – he will implement the Union’s proposal immediately. Senators should not agree to any bailout until a TOB is in place to provide proper oversight and accountability of NYC budget and finances.

Furthermore, the anti-taxpayer rhetoric must stop. In fact, it must be replaced with a campaign to educate the NYC population of the importance of taxpayers in civil society. Schools that are geared to teach all about the importance of social programs must also teach the importance of the people who pay for such programs. The reality is that states and cities compete for high income taxpayers who have the ability to live anywhere. NYC is not competitive even without the rhetoric. The tone is set at the top and it seems unrealistic that Mayor DeBlasio will change decades of behavior to reverse his class warfare campaign. If so, he should resign or the Governor should replace him to prevent further damage.

NYC Bailout

Sadly, we expect NYC politicians will resist any real changes. They are satisfied with the toxic structure that exists now because it benefits them. The best indication of this is their failure to formulate a real plan to address the crisis and their attempt to execute a back-door bailout from the federal government by blaming everything on Covid. They do not want to face up to their failures and to the structural problems that contributed to this second major postwar financial crisis. The same thing happened with Detroit which avoided dealing with its problems until it had no choice but to file for bankruptcy.

A Federal bailout of NYC will not solve the structural problems that caused this crisis and therefore increases the risk of a third-post was financial crisis that the next generation will have to deal with. It’s important that Federal funds be withheld until there are real reforms that change the dynamic. The key is ensuring that Taxpayers have a voice in budget and finance decisions and the TOB is therefore essential.

NYC leadership’s resistance to change can only be overcome by united taxpayers. The federal government can help by refusing to bailout the City unless the toxic anti-taxpayer structure is reformed and a TOB is implemented. Both Democrat and Republican Senators have an interest in ensuring this absurd financial and governance disaster will never happens again. Once NYC is turned around, taxpayers in other cities may be inspired to start chapters of the Union to advocate for taxpayer rights and for a TOB to ensure stability and accountability. The Union of Taxpayers hopes to bring together all the key parties to solve this problem for the good of New York City, for all of America, for the legacy of our nation’s founders and for future generations.

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Davis is a member of the Union of Taxpayers, a division of Liberty Tree of America, a non-partisan organization that advocates for taxpayer rights. Davis also blogs on Parler @UnionofTaxpayers, on [email protected] and at https://unionoftaxpayers/blog

 

 
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