A Peripatetic Journey to Our Fiscal Future
By Kim Rueben :: November 29th, 2011
I spent much of the last couple of weeks travelling around the country to discuss taxes, spending, and the economic future of specific locales. I started in Westchester NY, where local officials are trying to decide whether to override the state’s new property tax cap to maintain services at current levels. Some tax increase proposals would do just that, but others may be designed to score political points against Albany and illustrate that the caps passed in last year’s budget deal are more cosmetic than real.
I then went to New Jersey to discuss its economic future. While others made the case against a millionaires' tax I made the slightly unpopular proposal that New Jersey should embrace its high tax, high service, and high income profile. New Jersey has one of the nation’s highest per pupil spending levels. Maybe there’s room to cut and reform, but spending has given the state good schools and the highly educated work force needed to staff its industrial mix of finance, pharma and health care, and tech.
I ended the week in Las Vegas, visiting my parents who like many New Yorkers left the snow for the double lure of better weather and lower taxes. They illustrate what might be a natural progression of people leaving the Northeast to retire. Indeed, the most compelling evidence about the migratory effect of higher taxes concerns retirees, who are the most mobile. While taxes are low in Vegas, some of the shine has definitely left Nevada, with high foreclosure and unemployment rates. Nevada is still reeling from the Great Recession, especially since its lifeblood consists largely of construction and tourism, two sectors especially hard hit. Nevada got by as a low tax, low spending state partly because its good jobs in tourism and construction didn’t require many educated workers. The state’s public services were paid for mainly by visitors as sales, hotel and gaming taxes and there is no income tax. Now, Nevada is trying to remake itself as a more diversified economy, though restrictive rules on passing new state taxes mean it’s unclear how Nevada will pay for government services, including investing in schools to create this new diverse (and better educated) workforce.
In the middle, I went to New Orleans to talk taxes. While enduring serial disasters, including hurricanes and oil spills, New Orleans offers a lesson in hope. While the devastation Katrina wrought was tremendous, it did manage to sweep away the inertia that had kept a failing school system in place. As recounted in a terrific and inspiring speech by Scott Cowen, president of Tulane, the silver lining to New Orleans’ clouds may be a revamped school system with higher test scores and graduation rates and a more engaged citizenry. New Orleans still has a high poverty rate and too many disengaged youth, but the city is moving in the right direction. As President Cowen noted, a more prosperous future requires first fixing the schools.
And that remark leads to an important lesson for most places. If public officials really understood that taxes and public spending are set in tandem and that public investment, especially in our kids, is the foundation of a bright future, more of them would bet on their kids and future prosperity would be less of a crap shoot.