The following appeared on Tuesday, September 22, 2020 on The Island Now’s website:

The federal government’s budget deficit is hitting all-time highs and New York’s 2020-2021 state and local government budget deficits are mushrooming.

And if Joe Biden wins in November, his new spending proposals will exceed $5.4 trillion over ten years.

Where will all the money come from to plug budget gaps and to fund new spending? Tax hikes.

Biden has already proposed raising the top income tax bracket on people earning over four hundred thousand annually to 39.6 percent. The capital gains rate will jump from 23.8 percent to 39.6 percent and corporate taxes will go from 21 percent to 28 percent.

However, if the Democrats win control of the White House and both branches of the Congress, don’t expect the radicals to be satisfied with Biden’s plan. My guess is they will insist that rates for income taxes and capital gains hit at least 45%. As for the corporate tax rate, they will probably push it to 35%, the rate during the Obama years.

In New York, Gov. Cuomo has been lobbying for $59 billion from Washington to close the fiscal gaps for the state, the MTA, and local municipalities.

But even if he gets that money from a Biden administration, it’s only a one-shot revenue. It does not fix the structural deficit caused by Cuomo’s shutdown of the New York economy.

Tens of thousands of small businesses and restaurants that will never reopen and the exodus of the state’s top earners will have long-term effects on tax revenue streams.

While Governor Cuomo understands that increasing taxes will not be enough to cover the projected deficits, his message is failing to register with the Democratic-controlled state Legislature.

Those Democrats are calling for the rate on millionaires, which is presently 8.82%, to be increased to 9.6 percent for those making over $5 million annually, and for those earning over $100 million, 11.85 percent.

The most ridiculous proposal is a tax on unrealized capital gains of equity holdings of billionaires.

If enacted, people would have to pay a tax on a stock that has appreciated in value even though the owner has not sold the investment and taken again.

Here’s how that would work: An investor buys a stock on January 1 for $5 a share, that at year-end is valued at $8 a share. The owner would have to pay a tax on the $3 appreciation.

But, say in March of the next year the investment goes south and the investor sells it for $2 a share. The owner not only takes a 60 percent loss on the investment but is stuck paying an unrealized capital gain tax on April 15 on the losing stock that the investor no longer owns.

Sound crazy? It is.

A tax on unrealized gains, by its very nature, is ludicrous.

As for local governments, an important source of income—sales tax collections—continues to decline. In August, it was off 7.8 percent statewide compared to a year ago, and in July it was down 8.2 percent. In Nassau, sales tax revenues, this year, have been down 10.5 percent.

To fill the 2020 deficit hole, Nassau might be able to issue debt through the Nassau Interim Finance Authority. But that, too, is only a one-shot.

Other municipalities may go to Albany and beg for the authority to issue deficit debt.

That remedy, however, only kicks the fiscal can down the road. It sticks future generations—the children and grandchildren of today’s taxpayers—with the bill for this year’s spending.

Unless elected officials at every level of government agree to do more with less, and address the skyrocketing costs of entitlement and pension programs, every form of taxation will have to be increased.

And considering that over 400 thousand have fled New York this year, raising taxes will only exacerbate the situation.

E.J. McMahon, a senior fellow at the Empire Center for Public Policy agrees. “State lawmakers,” he observed, “now clamoring to jack up state and city tax rates on millionaires insist the targeted taxpayers won’t mind—and won’t respond by simply moving. But the new IRS data add to the body of circumstantial evidence pointing to an increased outflow of high earners from New York even before the pandemic.”

With federal, state and local taxes poised to go up, it should come as no surprise if the most robust corporate sector in New York is the moving van industry.

The following appeared on Monday, September 7, 2020 on The Island Now’s website:

Since Gov. Andrew Cuomo took office in January 2011, he has invested billions of taxpayers’ dollars into business ventures and so-called job-creating projects.

Regrettably, most of those investments have been flops.

Remember Start-Up NY? Cuomo spent over $50 million on television and radio commercials to promote that program, which grants ten years of no taxes to approved technology companies that locate in zones near state and city university campuses.

The return on the $50 million investment was awful. Between 2013 and 2016 only 408 had been created at a cost of $122,549 per position. (The dismal results may explain why we have not heard much of Start-Up NY in recent years.)

But that’s not the only failed program.

An investigative report released in June 2017 by the Gannett newspaper chain revealed that $13 billion in tax incentives, granted by state and local job programs during Cuomo’s tenure in office, had seriously underperformed and lacked transparency on how that money had been spent.

The report noted, for example, that Cuomo’s Regional Economic Councils had pledged $4.4 billion to 530 projects between 2011 and 2017, but few had job creation targets, and there were potential conflicts of interest.

It gets worse.

In August, the office of State Comptroller Thomas DiNapoli released an oversight audit of select high-technology projects funded by New York’s Empire State Development Corporation to determine if taxpayer money “is effectively spent and is producing the intended results.”

Formerly known as the Urban Development Corporation, EDC is the primary state agency responsible for coordinating, monitoring and funding the billions of dollars of investments in private companies that are expected to create jobs and spur economic growth in financially depressed parts of New York.

The audit, which covered the period Jan. 1, 2013 through April 30, 2019, focused on a number of expensive high-profile projects, including the “Buffalo Billion” initiative.

The auditors concluded:

• Initial project assessments lacked sufficient detail, such as reviews of the financial viability of beneficiary companies and cost-benefit analyses to assess the overall benefits of the projects, to justify the use of state funds.

• There is a lack of consistent and rigorous performance and evaluation standards for measuring whether programs and projects attain their intended goals.

• Public progress reports provide limited and conflicting information on high-tech projects’ progress, making it difficult to determine their current statuses.

And despite the billions expended, the projects have not created the promised number of new jobs.

The largest state investment (I use that term loosely) was $995 million in the four “Buffalo Billion” high-tech projects: the RiverBend Tesla project, the Buffalo IT Hut (IBM), the Medical Innovation and Commercialization Hub, and the Buffalo Institute for Genomics.

The biggest piece of change, $791 million, went to the RiverBend Tesla project, which—surprise, surprise—is not meeting expectations.

EDC’s own benchmark for such projects is $30 in benefits for every $1 spent. As for the RiverBend project, EDC expects the economic benefit per $1.00 spent will be a paltry $0.54.

How pathetic is that?

The audit points out that when the RiverBend project was expanded in 2014, the governor boasted 5,000 jobs would be created.

As those job numbers failed to materialize, however, the state agreements with RiverBend were amended to adjust the employment targets. The amendments reduced “the number of jobs required to be located at the RiverBend facility, as well as making it unclear what and where the remaining jobs will be.”

In other words, Cuomo’s “Buffalo Billion” investment, which he boasted would “create thousands of jobs and spur investments in new investment and economic activity” in Western New York has stalled.

In fact, despite the state’s investment of $995 million, Western New York experienced between 2011 and 2017 a 2.1 percent decline in advanced manufacturing jobs and a 2.6 percent decline in Life Sciences jobs.

How sad is that?

Time and again New York politicians have squandered taxpayer money in dubious corporate investments.

When will Albany pols learn that their job is not to be stock pickers, but to reduce taxes and regulations to attract private investors willing to risk their money to spur job creating economic activity in the Empire State?

The following appeared on Monday, August 24, 2020 on The Island Now’s website:

When the Nassau Interim Finance Authority voted in January 2011 to impose a control period on the county government, the board chairman, Ronald Stack—an expert in municipal finance—had a plan in mind to get the county back on the path of fiscal righteousness.

The Stack plan, which included controls on spending and hiring, a wage freeze, and some tax-cert borrowing, was working, and the annual GAAP deficit was declining through 2013.

A wrench was thrown into the plan, however, when Stack’s successor, NIFA Chairman Jon Kaiman, negotiated a union wage deal in 2014 that was nothing more than blue smoke and mirrors. Kaiman’s claim that the deal was cost-neutral was false and based largely on expectations for the ill-fated and infamous county speed camera program.

An analysis released by the county’s independent fiscal watchdog concluded the new labor amendments would cost Nassau taxpayers somewhere between $120 million to $292 million.

The Kaiman deal caused the Nassau budget deficit to jump in 2015 to $189.2 million.

In later years, however, the county’s deficit began declining, thanks to NIFA’s insistence on fiscal discipline (including multiple rejections and revisions of county budgets) and a strong economy.

The county has reduced its dependency on borrowing for capital projects, employee termination payments, and legal judgments and settlements.

Sales tax and other key revenue streams had grown significantly and rising property values had stabilized property tax streams.

In fact, in fiscal 2019, the county incurred its first GAAP surplus, $76.8 million, in decades.

If that trend continued, NIFA might have lifted its controls in 2021.

But all bets are off due to the COVID-19 pandemic.

On August 18, NIFA issued its mid-year analysis of the county’s financial plan—and it is depressing reading.

NIFA projects that the $3.55 billion 2020 budget can incur a GAAP deficit to the tune of $334.2 million.

In the out years, the budgets are projected to have deficits of $481.4 million in 2021; $423.9 million in 2022; and in 2023, $436.3 million.

What’s driving these deficits?

The main culprit is the reduction in sales tax dollars due to Gov. Cuomo’s shutdown of the economy. In the second quarter, those revenues were down 24 percent compared to the same period in 2019. Sales tax revenues could be off as much as $237.8 million in 2020.

Proceeds from other income streams (i.e., Department Revenues, Fine and Forfeitures, OTB payments) are also taking hits due to lower transaction and economic activity.

NIFA estimates that total revenues could be off as much as $334.2 million by year end.

To address this crisis, NIFA Chairman Adam Barsky urged the county “to use the economic catastrophe as an opportunity to go beyond pre-existing geographic and political disagreements and examine all options, including those that might have been disregarded in more ‘normal times.’”

Many of the options available to elected officials can be found in the Grant-Thornton study commissioned by NIFA in 2011 to identify potential savings and cost-cutting opportunities valued at between $251 million and $319 million.

Since most of the recommendations have been ignored, the nine-year-old report is still relevant and its suggestions valuable.

The savings the county executive has proposed thus far don’t cut it. NIFA’s analysis reveals “almost 40 percent would not provide savings on a GAAP basis and more than 90 percent would be non-recurring.”

These gimmicks will not put the county on a firm, structural financial footing. They will only kick the fiscal can down the road.

To address the projected deficits in the coming years, NIFA recommends that the county “implement gap-closing initiatives in fiscal year 2020, which provide recurring revenues and savings beyond the current year; and pursu[e] productivity improvements through collective bargaining in order to control labor costs, which represent approximately half of total spending.”

Such measures and increasing sales tax receipts, due to a recovering economy, may significantly improve the county’s fiscal condition.

However, if the County refuses to deal with fiscal realities and employs fiscal sleight of hand schemes as the Republicans did back in the 1990s and during the corrupt Mangano administration, NIFA will have to step in and impose what Chairman Barsky has called “Draconian” spending cuts.

Barsky said the measures could include laying off as many as 2,900 employees or hiking county property taxes by up to 60 percent.

The time has come for the county to face reality and to implement a dramatic restructuring of its government operations.

And the road map can be found in the 300-page Grant-Thornton report, as well as a subsequent, shorter report commissioned by NIFA a few years ago.

Implementing its scores of recommendations could be the prescription to cure the ailing county government. NIFA can impose controls, but it can’t create political will—that’s up to the county’s elected officials.