To the Editor:
Re: “Wisconsin’s Budget Approach: Solution or Disaster?,” Opinion, March 30
The line of reasoning employed by “Wisconsin’s Budget Approach: Solution or Disaster?” is a common one derived from the message boards, claiming that much of America’s ills stem from an economic and political system that is, and can only ever be, inequitable in one direction; the rich victimizing the rest. In fact, though, this is a false dichotomy. To be sure, no one can justly claim that the poor have advantages over the wealthy, or that the poor do not need better assistance than they currently receive. However, the recent Guest Room entry ridicules Republicans for picking unions as an easy target, while it does the same towards the “wealthy.” The truth is that structural budget problems — those not resulting from periodic economic volatility — grow out of ineffective government that promises too much, rather than taxes too little.
Public sector unions are bad public policy in theory, let alone in practice, because they do not result in, “mutual agreement and cooperation,” as Guest Room stated, but instead bind future taxpayers to foot bills they never agreed to and cannot amend without overcoming significant hurdles. In contrast to private sector unions, public sector unions place the union on both sides of the bargaining table, effectively making them a monopoly. They elect, lobby and finance the very politicians who negotiate the union agreement. The result is retirement benefits collected as early as 55, with miniscule employee contributions, a guaranteed rate of return usually around eight percent regardless of investments, largely paid for by taxpayers. I want decent benefits for teachers and sanitation workers as much as the next guy, but this is simply unfair.
Make no mistake, taxpayers do pay. In 2009, the Wisconsin Retirement System received $1.37 billion in contributions from employers (state and local government) and employees (teachers, general employees, elected officials, etc.). Of this $1.37 billion, employees contributed just 12 percent. Taxpayers were responsible for the rest. In addition to the problem of finances, public union collective bargaining agreements CBA create heavy burdens for localities, which is the chief reason Gov. Walker of Wisconsin has rightly pushed to eliminate the practice. In many instances, towns and school districts are forced to pay CBA benefits implemented by the state, as is often the case with NYC. Lastly, Guest Room argued that eliminating collective bargaining rights for public employees is, “punishing the lower classes and eliminating their rights.” Unionized state and local employees earn 20-30 percent more than their non-unionized counterparts, so if they are “low class” then their non-unionized brethren must be the bottom of the barrel. Also, I cannot recall learning about a right, Constitutional or natural, to collectively bargain.
Guest Room’s naïve answer to the budget problems is increasing taxes on the wealthiest five percent of taxpayers. Despite the compelling regurgitation of Paul Krugman’s — everybody’s favorite liber… I mean economist — column, raising taxes sounds better than it is. Some numbers from 2008 IRS data illustrate the full story. The top five percent represents seven million tax filers (more than seven million people) who had annual incomes of at least $159,619. It is true that this top five percent had about 40 percent of the U.S. income in 2008 (35.75 percent to be exact). Yet, in 2008 these seven million filers paid nearly 60 percent of all personal income taxes.
A back of the envelope calculation shows that taxes as they currently stand are not an insignificant expenditures for these “wealthy Americans.” A NYC resident (I think many Cornellians will one day hold this label) pays federal, state and city tax on personal income. Using an income of $159,619, an individual can expect to pay 34 percent of this in taxes. Of course this is a rough estimate and does not include certain changes and credits, but nor does it include other taxes such as a payroll and property. Would it be appropriate for five percent of Cornellians to pay 60 percent of all tuition dollars? I tend to think not.
Despite what Guest Room asserts, there are no easy answers to the state and federal budget problems. However, it can be done without raising income taxes on the “wealthiest.” Just ask New York’s Democratic Gov. Andrew Cuomo, who rejected calls to reinstitute higher tax rates, yet still balanced the budget. Either budgets will be broken, or the culture of costly dependency on government programs will be broken. Rather than raise taxes, which would only give more money to an already bloated government that contributes negatively to U.S. productivity, policymakers should reform the tax code, thereby lowering rates but eliminating many loopholes and carve-outs. They should also aim for efficiency gains from government, such as eliminating local mandates, allowing for local experimentation and aligning incentives through increased information and less hampering regulation. This is anathema, however, to those who consider themselves progressive because they advocate the easy answer of more redistribution, and avoid the tough question of how systems can be changed.
Lee Blum ’11