Faso: High taxes will prevent job creation

Former minority leader of the state Assembly and Republican candidate for governor in 2006, Faso is a partner in the law firm Manatt, Phelps & Phillips.

Across the state, over 93 percent of school spending plans passed in last Tuesday's election, despite concern that voters would express their anxieties about taxes and spending by turning budgets down. It simply didn't happen -- and some are assuming that this is somehow a signal of public contentment.

At the same time, Gov. Andrew M Cuomo is touring the state to promote his proposed property tax cap, one of three items he's pushing before the close of the legislative session in Albany in a few weeks. The State Senate passed his tax cap plan in January. But the Assembly hasn't introduced one of its own, and it is expected to seek exemptions for pension and health costs, likely eviscerating the benefit of a cap.

Meanwhile, New York's reputation recently took two new hits. CEO Magazine publishes an annual survey of business conditions, evaluating which states have the most hospitable or hostile environments. It won't come as a shock that New York ranked 49th, with only California faring worse. The survey bases its analysis on taxes, regulatory burdens and difficulty in doing business. Clearly, New York has much to do on this score.

Just as telling, the Tax Foundation released its rankings of the residential property tax burdens of nearly 3,000 counties nationwide. Nassau and Suffolk both rank in the top 10 when property taxes were evaluated as a percent of household income. And the 15 highest-taxed counties when property taxes were compared to housing values are all in upstate New York. The housing boom that impacted many parts of the country never arrived upstate, yet local school and property taxes continued their upward march. As a consequence, jobs and people are fleeing in increasing numbers, and many parts of the state are in an economic death spiral.

A property tax cap can impose a strict fiscal discipline on school district and local government spending, but without mandate reform from Albany, it simply won't be effective. Cuomo has hinted at pension reforms, too, but has apparently ruled out the real, long-term reform in this area -- a move to 401(k)-type plans for new public employees. The governor deserves praise for closing the $10 billion budget gap this year, but the next few years present economic problems equally difficult, if not more so.

The economic crisis hit the state and our citizens very hard. There are growing signs that the national economy is slowly turning the corner, but if New York doesn't reverse its anti-business reputation, the state won't be able to fully take advantage of the turnaround when it arrives. We can't avoid fundamental change and simply wait for economic recovery to boost state and local revenues. Nor can we simply raise taxes on the "rich" without adverse consequences to job growth.

Confiscatory taxes, supporting a bloated governmental structure, combined with anti-business laws and regulations, will continue to drive productive citizens and the jobs they create away from New York. Economic recovery should not be used as an excuse to return to policies and governing arrangements of the past. Instead, the state needs a new set of policies with a single focus: private-sector job growth.

A pro-jobs agenda would encourage private-sector investment and profit. The property tax cap is critical; lowering governmental costs and eliminating sweetheart deals for public unions and politically connected businesses is part of it, too. And a vastly simplified tax system for individuals and business would help change the state's well-deserved negative reputation.

More fundamentally, we need to recognize that government doesn't create jobs or wealth, the private sector does. Being ranked as the property tax capital of the nation, with the second worst business climate, is a prescription for continued decline. Citizens and policymakers alike must realize that our state needs a fundamental break from its past if it expects a more prosperous future.