Why New York City Is A High Tax Jurisdiction

Our mayor Mike Bloomberg likes to call New York a "luxury good" when defending our high taxes.  And progressive New Yorkers seem to take pride in paying high taxes, convincing themselves that the taxes pay for a higher and more compassionate level of services to the children and the needy.  Unfortunately, they are completely being taken in.

There are really three places where almost all of the differential in spending between New York and other jurisdictions can be found:

(1) Public employee pensions are way out of line in New York.  Current spending by the City on public employee pensions is $8.4 billion per year, 12 % of the total budget.  That's because we let City workers retire after 20 (police and fire), 25 (transit) or 30 (teachers) years of work, and spend 25 or more years of fully-paid leisure.  The $8.4 billion is about $5 billion above a reasonable amount for pension expenses.

(2) The cost of education is also way out of line in New York. City.  According to census bureau figures cited here, New York City school spending was about $19,000 per student in 2009.  That's about double the nationwide average of $10,615 per student cited here for 2010.  What do we get for double the cost per student?  Worse test scores than the national average.  The double cost has nothing to do with providing better education to the kids, and everything to do with a restrictive union contract that makes us hire twice as many people to do the same work.  With over a million school children, the extra $8000 per student is an $8 billion budget item.

(3)  In New York, we pay between double and triple the amount per Medicaid beneficiary as they pay in other large states like California and Texas.  According to statistics here (statehealthfacts.org), California's2009 Medicaid payments per enrolee were $3,527; Texas $4,884; and New York$8,960. With over two million enrolees in New York City, that's a differential of about $10 billion that we're spending above what California would spend for the same number of people. The Feds pick up about half of the $10 billion, and the state a quarter, so for the New York City budget this is about a $2.5 billion number.

These three items account for over $15 billion of excessive spending in a budget of about $70 billion.  Do the taxpayers get anything for this extra $15 billion?  For comparison, the entire take of the City income tax is about $8 billion.