New York faces one of the largest budget deficits in the country for the coming year at $14.2 billion. The State’s 2009-10 fiscal year begins April 1, 2009. Two responses to addressing the crisis have dominated the policy debate. While both acknowledge the detrimental impact Wall Street revenue declines have had on the State’s fiscal condition, they diverge in significant ways.
One response frames the deficit as a matter of excessive public spending and calls for massive cuts to public programs and services. The other finds that, following thirty years of personal income tax (PIT) cuts for the wealthiest New Yorkers, the State’s overall tax system is highly regressive and incapable of supporting essential service needs. This view warns of the economic damage that would result from large state budget cuts and calls for restructuring the PIT as a necessary step towards fiscal stability in this troubled economic climate.
In the context of a deepening recession, which is the most sensible path to take? This policy brief reviews arguments, analysis and data pertinent to deciding whether progressive tax reform should be part of the solution.