Good afternoon. Today’s points:
- Taxing loopholes
- Suffolk's marathon man
The bonds that bind
Residents of the Farmingdale School District have approved a $36 million bond for a sports complex, a bond officials say will reduce taxes related to debt service by $71 per year for the average homeowner.
Well . . .
That’s true in that limited sense. That tax will go down by $71. But it’s also true that had the 30-year bond not been approved, those taxes would have been reduced by $133. That’s because another older bond is about to expire, which would have saved taxpayers that larger amount. Instead, Farmingdale is replacing one bond with another. So one could argue that for taxpayers counting on retiring the old bond, the new bond will cost them $62 per year.
Farmingdale is far from alone in doing this. School districts commonly time one bond to start as another ends, and tout the “savings.” What they’re doing is baking a bond payment into their budgets in perpetuity.
Case in Point
The loophole that isn’t
Election endorsement meetings are a great way to hear about new ideas that are gaining political traction, and one proposal that popped up from two Democratic State Senate candidates in recent weeks is a doozy: a massive increase in the state tax rate of New Yorkers who enjoy the federal “carried interest” loophole. If passed, it would raise $3.7 billion a year for schools and economic development.
Both Peter Magistrale, who is challenging State Senate Majority Leader John Flanagan in the 2nd District, and Ryan Cronin, who is challenging Sen. Kemp Hannon in the 6th, listed the idea among their priorities if they get to Albany.
The loophole allows fund managers to pay on their earnings at a 20 percent federal rate rather than the top rate of 39.6 percent because it treats the income as long-term capital gains, which are taxed at a lower rate to encourage investments in which an investor risks losing money.
The reason the loophole angers many is that these fund managers don’t have their personal money at risk. They manage it for investors and each year take a set percentage of the investment, often 2 percent, plus a percentage of the profit, often 20 percent.
Two Democratic assemblymen, Jeffrion L. Aubry of Flushing and Sean Ryan of Buffalo, introduced a bill in March that would make up this huge gap in the federal rate by tacking it on to state tax bills. But to prevent an interstate “hedgie” flight, it would go into effect only if Massachusetts, New Jersey and Connecticut also make up the gap.
However, the idea is a complete nonstarter for a bunch of reasons: A quadrupling of the top state income tax rate isn’t going to pass muster in Albany, and members of Congress in both parties, as well as both major presidential candidates, say they want to fix this in Washington. Setting up a funding stream for the state that could disappear the minute the feds act is few people’s idea of good policy.
At a premium
Suffolk County Executive Steve Bellone was the driving force behind launching the inaugural Suffolk County Marathon — and he plans to run the full course again on Sunday in the event’s second year. Bellone’s office wouldn’t comment on whether he’s trying to better his time of 4:42:51.
The marathon has become a signature accomplishment for the county executive, who lost 70 pounds since taking up running and who used the activity as a theme in his TV ads for re-election last year.
But his focus on running has some in the county grumbling. Legis. Thomas Barraga (R-West Islip) told The Point, “I have nothing against the marathon, but when you’re stressing the marathon in every other press release — what are you doing about the budget?”
With borrowing from the pension and sewer stabilization funds, Barraga estimates that the county’s deficit is approaching $400 million when taking into account those future repayments. Comparatively, a 26.2-mile run might seem like a cakewalk.