In many ways it was surprising news that Nassau County’s finances got taken over by the Nassau Interim Finance Authority. Here was one of the most propserous counties in New York State. A large proportion of high income residents who provided a strong tax base and enjoyed good county services. If there is a definition of comfortable, it can be found in Nassau County. How then did the County end up in such dire straits. Yes, there had been a culture of cronyism and some corruption but that does not explain it. It seems the County Executive wanted to maintain services and cut taxes and the numbers didn’t add up. While tyring to do this is that people like the services government provides so it is politically not very popular to cut them. There are also a lot of services people need so it is morally wrong to cut them. However, the supply-side economic argument goes that cutting taxes will lead to increased economic activity and more revenue. In the case of Nassau County it did not and now the County is completely underwater financially. So what are the lessons to be learned here.
From Albany to Washington, you hear the continued tax cap and cut refrain. Governor Cuomo wants to cap property taxes and get rid of the recently enacted millionaire’s tax surcharge, depriving state and local governments of billions of dollars. The problem is property taxes help pay for good public education which people want and need. To make up for this shortfall, local governments are going to have to weigh cutting other services that people want and need like nice parks, sanitation and snow removal and other things that make cities and towns desirable places to live. By getting rid of the “millionaire’s tax,” Governor Cuomo is attempting to close a $10 Billion budget gap solely by cutting services. Not only are no taxes being raised, but he wants to cut an existing tax surcharge. I admire his desire to make government smarter and more accountable, however there will be a lot of painful cuts that no amount of smart government can hide. Mayor Bloomberg pointed out that 20,000 New York City teachers could be at risk.
The Nassau experiment shows that it is difficult and wrong to continuously cut services that people want and need. The cuts do not always happen and when you cut taxes too, the numbers just don’t add up. In fact it isn’t just liberals opposing the property tax cap, many localities see the problems they will face through either reduced services or increased fees they will have to charge their residents. So when you hear people saying cut taxes, cut taxes, cut taxes, look to Nassau, this simplistic solution can have disastorous results.
