Solving New York State's Fiscal Crisis
Barry, Joanne S., The CPA Journal
A Much-Needed CPA Perspective
New York was recently ranked number one in a top 10 list of states expected to see more residents move out of the state than move in this year due to high taxes and a high cost of living, according to a December 8, 2010, article in Forbes magazine, which used numbers derived from Moody's Analytics. Add to this the looming specter of future underfunded pension benefits, the current 26year high in unemployment, out-of-control property taxes, and this year's $9.2 billion state budget gap that newly elected Governor Andrew Cuomo referred to in his State of the State speech, and our economic picture looks pretty grim.
It is impossible to examine economic conditions in a vacuum. When a domino falls, it causes a series of seemingly inexorable events that can only be stopped through a well-planned intervention. When individuals and companies give up on New York, they leave those of us who remain with a shrinking tax base, an increased tax bill, and, thus, reduced state and local services. This type of flight affects all sectors of the economy and the community at large: Small businesses such as restaurants and retail stores see a reduction in sales, New Yorkers lose jobs, and programs for the poverty-stricken and the working poor are discontinued due to reduced government funding, fewer donations, or both. According to Cuomo, many New Yorkers have been "voting with their feet" over the past decade and leaving the state in search of greater economic opportunities or states with friendlier business and property tax rates. A January 15, 2010, piece in Forbes found New York to have property taxes that are 79% above the national average, and the state's corporate tax burden, at 7.1%, is one of the highest in the nation.
New York is not the only state with a troubled economy; in fact, the trend is so widespread that some policymakers, according to the New York Times, are researching a constitutionally viable way for states to declare bankruptcy, which could allow them to alter retiree pension benefits. On the local level, our own Nassau County's finances are now controlled by the state due to the county's inability to balance its budget. New York State is not facing bankruptcy yet, but politics should not be the driving force in determining our fiscal policy. Who better than CPAs to provide state leaders with an analysis of our financial problems, along with proposed solutions?
How the Profession Can Help
Cuomo says he's trying to fix this broken economy. …