Lessons from Nassau County: High taxes don’t cushion the fall of the wealthy mighty

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On Jan 26th, the NYTs splashed the headline… “New York State Seizes Finances of Nassau County”. Bloomberg followed suit, but went the extra mile with their headline, New York Seizing Nassau County Finances Shows Limits of Tea Party Promises, to drag the fiscally responsible grassroots movement into Nassau County’s spending failures. Always slow on the uptake came Reuters a day later, with their headline, SPECIAL REPORT: A Long Island Tax Cut Backfires on the Tea Party.

Not to be outdone, the Daily KO’s took it to their predictable guttural and suggestive level, derogatorily proclaiming “teabagger”, Edward P. Mangano, brought Nassau County “to it’s knees.”

Ugh… Nothing like a saunter thru the KO’s mindset filth to make one feel the serious need for a shower….

The escalating level of misreporting, revisionist history and finger pointing in all the wrong directions had me scratching my head. First of all, the seizure of the county financials happened when Mangano was in 11th hour negotiations with labor on contracts, so was that premature, and for political points?

Secondly, how does one of the nation’s wealthiest counties – where approximately half of the county’s home values are over $565K” – go underwater when they are ranked as the #2 county with the highest property tax in 2009? The average Nassau County resident pays a whopping $8,940 annually. To top it all off, the county’s unemployment rate of 6.6% last April was well below the state average.

At first blush, this would seem to be Obama’s dream community. Wealthy, high taxes, low unemployment, and until just 12 months ago, Democrat controlled….

…. And yet still financially underwater. Gee, what a surprise.

The second head scratcher was the tea party link. Now I realize that it’s a traditional lib/prog trait to assign all today’s woes to the Bush administration, giving Obama every pass possible. But it’s apparent that trait of politically convenient timelines isn’t a two way street when it comes to Republican leadership in Nassau County. That said, I’d call the well heeled and labor entrenched Mangano about as “tea party” as Scott Brown. Meaning, it’s more likely he was the better of the two alternatives when it came to gouging the residents with yet more taxes.

Reuter’s issue is that Mangano – who took the reins from Democrat County Exec, Thomas Suozzi in Jan 2010 – repealed a heating oil tax implemented by Suozzi in his last months of stewardship, and instead lobbied the state for a .25% increase in the county’s sales tax, up to 8.875%.

But in the opinions of Reuter’s, the Daily KO’s and Bloomberg’s, Mangano’s repeal of a 2.5% heating oil tax that would result in notion of “lost revenue” (there’s that’s weird phrase again…) to the tune of $18 mil yearly, is the catalyst for the county going under?? ($40 mil, according to Bloomberg… no citations for that figure, but likely based on the latest rising prices of oil).

Surely these folks can’t be this dumb. Wait… don’t answer that.

Mangano walked in the door with a $133 mil deficit (per Bloomberg’s numbers) 12 months ago, and promptly warned the 2011 budget was projected to be $286 million. To fix that gap, the already onerous property taxes would have to be increased by 36%.

Hummm… the more money they takes, it seems the more money they’s become short, eh?

In response, Mangano proposed $100 million in spending cuts and $60 million of increased fees and fines – and of course there’s someone whining in every political and lobbyist corner. But one thing is certain, this fall from fiscal grace by the wealthy mighty didn’t happen overnight. Nor can the current Nassau leadership be held the most liable, with just 12 months in office. Which is where the revisionist history comes into play.

Nassau County, a former GOP stronghold, started swinging left when Clinton showed up on the POTUS ballot in the early 90s. Nassau County voters were in the Democrats’ pockets for both the 2000 and 2004 elections. In 2008, 53.84% of the county was in the Obama camp. If this place is a GOP bastion, it’s in registration only.

Local top positions weren’t any different with the reversing political trend thru the 90s, and the Democrats held the county’s power after the 2001 election.

But Nassau County is not new to overspending. The NYTs was reporting the same ol’, same ol’ about the county’s fiscal crisis, and a $100 million deficit back in Dec 1999. Of course, if you listen to the Wikipedia fiction, they say that Miracle Man Suozzi came in with a $428 million deficit… no citations to support that lofty number, of course. Especially since the county had a $100 million bailout from the state just a few years prior.

Something is wrong when one of the most prosperous counties in the nation goes broke in boom times. The fiscal disaster in Nassau County on Long Island provides a cautionary tale for political leaders everywhere. Last month voters revolted and put the County Legislature into the hands of the Democrats for the first time in modern history. Now the Democrats have to work with an unpopular Republican county executive to eliminate a huge budget deficit in the year beginning Jan. 1. Layoffs, service cutbacks, pay cuts, tax increases — all seem possible for the county’s 1.3 million residents.

The county executive, Thomas Gulotta, has announced cancellation of contracts and postponement of capital projects to close a $100 million deficit in a $2.2 billion budget. But since only $700 million of the budget involves discretionary spending, more austerity measures will be necessary.

Like New York City’s fiscal crisis of the 1970’s, the Nassau situation flows from the abuses of longtime one-party rule. A complacent political elite came to think it would never be punished for letting costs soar out of control and handing out patronage jobs, contracts and wage increases to party workers, campaign contributors and friendly unions. The political standoff is so poisonous right now that intervention may be required from Gov. George Pataki or State Comptroller Carl McCall and the Legislature in Albany. At the least, Mr. Pataki and Mr. McCall should order an audit of the county’s chaotic books. Taxpayers cannot be asked to pay more or accept diminished services, and county employees cannot be asked to give up wages or benefits, without an objective accounting.

Wow… all this about no one should have to ask taxpayers to pay more! Hard to believe this was the NYTs stance 12 years ago. Even more hilarious about that “abuses of longtime one-party rule”, eh? Especially when you consider that the ol Grey Lady didn’t have much problem with the “one party rule” since 2007, did they?

Needless to say, increased taxes and what cuts the Dem admins say they did didn’t work so well. So goes their march, and the futility of pinning their fiscal hopes on the Dems pulling them out of the money toilet at the turn of the century. After all, what do Democrats do when they are faced with a deficit? Why raise taxes, of course…. Which Suozzi did with property taxes. So much that one of the county’s larger bills is refunds to those who appeal their property tax assessment values…. Of which this year’s budget alone included “… $100 million to pay tax refunds, and counted on more than $20 million in new help from the state”. Humm… high taxes, lots of appeals and big refund payouts that are 50% of the deficit. Seeing any counterproductivity here?

When Suozzi saw the writing on the wall, and knew he could not afford to raise property taxes without major outcry, he sidestepped it with the heating oil tax instead. Despite all the cash flow they were absconding, they still needed more. That didn’t go over so well either. Especially when pinned to the price of oil during an POTUS administration, openly determined to make oil skyrocket to $5 per gallon at the pump.

According to Comptroller data provided (pg 15 in the PDF) in an October 2007 report – that was, oddly enough, prepared by several progressive alliances including the Long Island Progressive Coalition – Nassau County property taxes increased an average of 2.5% annually between 1995 and 2000… under the GOP leadership, if you remember. Under the Democrat leadership starting in 2001, the property taxes averaged an annual 6.5% increase. This same increased tax structure is born out when you sift thru the various years of the county’s Office of Legislative Budget reports. Hint… go back to 2003… leap to 2007-08… and then forward to the current projections to compare.

Along with the trend to the left comes the voices of protests to Mangano’s proposed spending cuts. Even last fall the demonstrators were out, including educators and teachers, denouncing the budget for shifting tax assessment costs to them, and drivers and mechanics worried about the Long Island Bus. Yes, folks… the educators are annoyed with what they call the toilet tax… the GOP/Mangano proposal that non profits, such as schools, hospitals and fire departments, yield their exemption from sewer water and also be charged a water usage fee like other counties in the state.

Oh the quips that come to mind on that one, eh?

In short, the Democrats have been collecting hand over fist for Suozzi’s terms, yet the mighty’s freefall is not cushioned. And, of course, no one wants to cut jack. And therein lies the lesson for the rest of us.

No matter how much we fork over, the elected ones are still going to spend more. Mangano’s facing a tough room here. But it’s a location we should all watch…. For where Nassau County appears to be going, we are not far behind.

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Nassau County is unique in NY in that it must absorb the cost of tax assessment reductions.
It cannot recoup them from the school districts that benefited from over-assessments.
So, if a property owner wins a reduction in assessed value, the county must pay.
The school district gets to keep the taxes.
And, in Nassau County it’s not unusual to be socked with school taxes of $8,000-$10,000 a year for a medium-sized ranch house.
Just one of their own slit-your-own-throat rules.

The greenies want fossil fuel taxes to subsidize green energy. Fossil fuels( Calgary) cost 2 to 3 cents to produce 1 kwh. Solar and wind cost 21 to 25 cents to produce the same kilowatt hour. In consumption terms electricity on average costs 6 times more than natural gas to heat your home. Yes, it correlates production and consumption. Then the bureaucrats tag on phony fees and taxes, and then the feds add a tax on the total. There’s not much room to subsidize “clean” energy and politicians will pay a price for this, especially when the whole province sits on a coal bed.

I don’t blame Bush for all our woes. I point the finger for planting the seed of destruction at Reagan. He’s the one that started our spiraling debt machine. He started the gun control trend in California as governor. He made the tax code as regressive as he could. Corporate welfare began anew during his administration.

Bush 41 doesn’t think I should be a citizen because I don’t believe in his imaginary friends, so I don’t think much of him, either.

NAFTA and the GLBA were passed during Clinton’s time, and both of those have been pretty crappy.

Of course, Bush did turn a small surplus from Clinton’s last budget into a $1.4 Trillion deficit in Bush’s last budget. He also had the largest domestic security failure since at least Pearl Harbor. He started two aggressive wars and signed the USA Patriot Act. Homeland Security and the TSA…

Obama’s first budget had a deficit slightly smaller than Bush’s last, but now with the new tax cuts, the deficit is going to be a record, I think. I’m not too happy that he passed Heritage Foundation health plan, either. It’s not like he actually got any compromise. He should have gone for the quality setup, instead.

Here’s a little tip for you Athensguy:

President has no power over debt or budget as outlined by the United States Consitution. That’s the duty that falls on the feet of Congress, whom I might add was dominated by Democrats during Reagan’s terms of office. Blame him all you want but rewriting history will not make you correct.

NAFTA was a Democrat Congress Minority agenda that was appealing to the RINO groups in power during Clinton’s Presidency. Even if Clinton vetoed NAFTA, the hairline differences in the two parties in Congress would have sought to overturn the veto.

@Mr. Irons:

I don’t believe that Congress overrode any vetoes of the budget during Reagan’s terms. If they didn’t, then he agreed to pass whatever the budget was.

GLBA was passed with veto override levels, too, but it still should have been vetoed by Clinton.

@athensguy:

Of course, Bush did turn a small surplus from Clinton’s last budget into a $1.4 Trillion deficit in Bush’s last budget.

Ah, yes…the mythical Clinton surplus rears it’s ugly head again.

We’ve addressed that before here at FA:

We’ve seen, and debunked, that argument before:

From the Wall Street Journal:

In the late 1990s, the government was running what it — and a largely unquestioning Washington press corps — called budget “surpluses.” But the national debt still increased in every single one of those years because the government was borrowing money to create the “surpluses.

Uh oh….this isn’t starting out too well for Mr. ParaLegal2:




View at EasyCaptures.com




View at EasyCaptures.com

Look at the charts above. See the bait & switch shell game going on with the numbers?

Now, let’s see what good ole Senator Fritz Hollings (D-SC), hardly a “con” or “right wing nut”…although he’s white and you’ll undoubtedly have some issue with that.

Here’s a link to the transcript if you want to follow along.

So the table itself, according to the figures issued yesterday, showed the Federal Government ran a surplus. Absolutely false.

::snip::

Both Democrats and Republicans are all running this year and next and saying surplus, surplus. Look what we have done.

It is false. The actual figures show that from the beginning of the fiscal year until now we had to borrow $127,800,000,000.

Doh!

Things can only get better right?

Right?

From the Center on Budget and Policy Priorities:

When these unified budget numbers are separated into Social Security and non-Social Security components, however, it becomes evident that all of the projected surplus throughout this period is attributable to Social Security. The remainder of the budget will remain in deficit throughout the next decade.

From CNN:

Despite a revenue shortfall, full benefits are expected to be paid out between 2017 and 2041. The system will draw on its trust fund, a collection of special-issue bonds from the government, which borrowed prodigiously from the program’s surplus over the years. But since the country is already running a deficit, the government will have to borrow more money to pay back its debt to Social Security. That’s a little like giving with one hand and taking away with the other.

Ooofff…..

This is looking worse and worse and worse for the South Side Shyster.

From the Ludwig von Mises Institute:

The surplus deception is clearly discernible in the statistics of national debt. While the spenders are boasting about surpluses, the national debt is rising year after year. In 1998, the first year of the legerdemain surplus, it rose from $5.413 trillion to $5.526 trillion, due to a deficit of $112.9 billion… The federal government spends Social Security money and other trust funds which constitute obligations to present and future recipients. It consumes them and thereby incurs obligations as binding as those to the owners of savings bonds. Yet, the Treasury treats them as revenue and hails them for generating surpluses. If a private banker were to treat trust fund deposits as income and profit, he would face criminal charges.

The fella who wrote that one was Hans F. Sennholz, Emeritus Professor of Economics at Grove City College, is an adjunct scholar of the Mises Institute.

I’d say he knows a bit more about economics than you Mr. ParaLegal2.

Let’s continue. From CBS:

With unemployment rising, the payroll tax revenue that finances Social Security benefits for nearly 51 million retirees and other recipients is falling, according to a report from the Congressional Budget Office. As a result, the trust fund’s annual surplus is forecast to all but vanish next year — nearly a decade ahead of schedule — and deprive the government of billions of dollars it had been counting on to help balance the nation’s books.

::snip::

The Treasury Department has for decades borrowed money from the Social Security trust fund to finance government operations.

Let’s see what the esteemed Walter E. Williams the John M Olin Distinguished Professor of Economics at George Mason University has to say about it:

Boiled down to its basics, that’s the budget “surplus” hoax that’s coming from the president and Congress. In 1998, there was approximately $120 billion spent out of revenue earmarked for trust funds like the Social Security, highway and unemployment compensation trust funds. There’s absolutely nothing in those trust funds except Treasury Department IOUs.

That means that when Congress reports there is a $60 billion surplus, we should subtract $120 billion from that so-called surplus. That would leave us with minus $60 billion — a $60 billion deficit for 1998. As such, budget surplus talk is nothing less than a sleight-of-hand accounting hoax perpetrated on the American people.

The budget situation is actually worse. The federal government uses accounting practices that if used by private companies would land the CEO and the board of trustees in jail. Here’s why: Today’s estimated federal government liability is about $20 trillion. These are federal government promises-to-pay such as the public debt, Social Security, railroad retirement, bank deposit and savings and loan insurance, guaranteed student loans, International Monetary Fund and so forth.

When private companies have future promises-to-pay, general accounting practices require that they hold actuarially based reserves to cover those claims. How much reserves do you think Congress has set aside to cover federal obligations? If you say zilch, nada, zippo, go to the head of the class. The bottom line is that if Congress followed general accounting practices, instead of a reported surplus, there would be a budget deficit of at least $200 billion.