Feature

Bush to New York: Here's Your $20 Billion—Now Drop Dead

It’s not hard to explain why New York seems to be fighting Bush and the GOP Congress on almost every issue important to the city. At a macro level, the budget policies the Bush administration has pursued over the past four years are wildly out of sync with New York’s needs. Some of the biggest budget winners of the Bush years have been in the areas of defense, homeland security, and agriculture. New York has virtually no defense industry. And, not surprisingly, Bush’s massive increase in farm subsidies hasn’t exactly helped Manhattan. Meanwhile, Bush’s budget priorities that haven’t passed are hardly pro–New York. For example, his long-stalled energy bill would lavish tax breaks and subsidies on the oil and gas industries based out West.

The other major budgetary change of the Bush years has been huge tax cuts tilted to the wealthy. On the one hand, the city has one of the highest concentrations of rich people in the world, so many individual New Yorkers benefited from the tax cuts. But the city as a whole should hardly be thankful. Bush’s tax cuts worsened the very problems plaguing the city’s dysfunctional relationship with D.C. The tax cuts helped create the $500 billion federal budget deficit that has constricted the flow of dollars from Washington to New York. Bush’s response to the deficits has been to freeze or cut discretionary spending—money for health care, education, housing, the environment, etc.—which happens to be the part of the federal budget upon which New York disproportionately relies.

There is another often-untold consequence of Bush’s tax cuts for New Yorkers. A quirk in the tax code known as the Alternative Minimum Tax (AMT) hits the city harder than other parts of the country. The AMT was designed to ensure that wealthy taxpayers can’t take so many deductions that their burden falls to zero. In 2001, Bush slashed regular tax rates but didn’t cut the AMT rates. The effect is that millions of Americans are starting to pay the AMT for the first time. Those hit hardest are members of the upper middle class living in places with high state and local taxes, like New York. In fact, the percentage of New York City taxpayers getting ensnared by the AMT is more than twice that of the country as a whole. Thirty-eight percent of New Yorkers with an annual income of $100,000 to $200,000—people who hardly qualify as superrich, especially in a city where the cost of living can be shockingly high—are now paying the AMT, while nationwide, less than 10 percent of taxpayers in that income range pay it. And anyone paying the AMT isn’t getting Bush’s tax cuts. Republicans don’t have a plan to overhaul the problem, and some see a partisan bias in their cavalier attitude, since low-tax areas of the country, especially the South, are harmed the least by the AMT. “Tom DeLay comes here and his constituents get tax cuts and New Yorkers don’t,” complains Jonathan Sheiner, an aide to Congressman Charlie Rangel.

At the same time the city is facing a Republican agenda hostile to New York, it also has to deal with its diminishing clout in Washington. In general, the power and influence in Congress have been shifting south and west over the past few decades. For example, New York State lost two congressional seats in the most recent Census while Texas gained two. And the congressmen that New York does have are absent from the most important centers of congressional power. Of the fourteen committees or subcommittees that control spending in the House of Representatives, only two have chairmen from the Northeast. (One of them, from New Jersey, runs the subcommittee on the District of Columbia, not exactly a plum perch from which to win dollars for northeastern constituents.) The majority of the House appropriations chairmen are from the South and West. In the Senate, ten of the appropriations chairmen are from the South and West, two are from the Midwest, and two are from the Northeast. Of course, every chairman in both chambers is a Republican. In other words, the federal budget is controlled by conservative Republicans from the South and West, while New York City is represented by liberal Democrats from the Northeast. It’s not really a fair fight.

Once upon a time, Bloomberg’s Republican pedigree was seen as a potential asset to overcome this disadvantage. But it actually seems to be making things worse. Instead of picking high-profile fights that draw attention to the city’s priorities, Bloomberg is stressing unity with his GOP conventioneers. Last fall, Bloomberg singled out Tom DeLay as the city’s chief GOP nemesis. After a conservative outcry, Bloomberg backed down from his criticism. But Bloomberg aides are confident of at least one legislative victory this year. They think they will get the extra $25 million they need to protect the Republican confab later this summer. Congresswoman Carolyn Maloney likes to say, “The only time New York is going to get adequate homeland-security funding is when Republicans come to town for their convention.” It looks like she’s right.