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Gov. Pataki's Remarks
House Committee on Government Reform

April 15, 1999

Page 4

were bursting, and jobs were on the run.

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The biggest taxes income taxes, property taxes and school taxes

were all rising every year at an alarming rate. But there were other taxes as well: The sales tax. The estate tax. Hidden taxes on goods and services. And scores of taxes that were imposed on businesses and paid by consumers.

All of these taxes served one purpose and one purpose only: To drive up spending and feed a government that was out of touch and out of control.

And that destructive cycle -- of taxes, more bureaucracy, more spending, more taxes and less freedom -- was in full throttle.

As government got more, families got less.

As bureaucracies thrived, businesses suffered.

Taxes were literally destroying the greatest state in America.

WHAT WE'VE DONE TO CUT TAXES AND RESTORE FREEDOM

Together with New York's Legislature, we confronted that crisis. From our first day, we held to a fundamental covenant that says: at all times and without exception, respect the people and let them lead the way toward real progress.

And in a state where the guiding principle is respect for the people, big government and big government taxation simply does not compute. That's why in New York we have embarked on the most ambitious campaign of tax cutting in the state's history.

It's working. In fact, our philosophy is working so well that it has created a new challenge for us. In that first year, 1995, we had to manage crisis. In 1999, our challenge in New York is to manage prosperity.

Today, taxes aren't going up every year, as they had been; they're going down, by

Gov. Pataki's Remarks
House Committee on Government Reform

April 15, 1999

Page 5

record amounts. Private sector jobs aren't going down, as they had been; they are going up, and jobs are now at their highest level ever.

That economic revitalization has been the key to solving one of New York's most serious problems. When I took office, one out of every 11 New Yorkers was on welfare; in New York City, the figure was one in seven.

But today, welfare rolls are shrinking every day, as people are finding the freedom that comes with work. Welfare rolls are down by nearly 653,000, and have fallen below the 1 million mark for the first time since December of 1967.

Families are buying new homes and refinancing their old ones, which says they're planning to stay in New York and build their future here.

It's hard to think of a tax we haven't cut.

We began by cutting income taxes. Today the vast majority of New Yorkers pay 25-percent less in income taxes today than they did in 1994.

We're cutting income taxes, business taxes and school property taxes. Taxes are being cut for small business people, family farmers, and senior citizens working families and retired couples.

We're cutting taxes on entrepreneurs trying to start businesses, businesses trying to grow jobs and people trying to find work.

We're cutting taxes for families who are both buying clothes for their children and saving for their college education.

Across the board, and in every conceivable category, taxes are falling ... in ways some thought were impossible.

When we first proposed cutting income taxes 25 percent, there were some who swore we could never actually do it. But we did, and it's saving New Yorkers $5 billion every year and helping to revitalize our economy.

Gov. Pataki's Remarks
House Committee on Government Reform

April 15, 1999

Page 6

There was once a time when New York was one of the only states that imposed its own tax on estates. But this year, New York's tax on death finally dies,

ong with the gift tax.

Once upon a time, we not only had one of the highest corporate income tax rates in the nation, but we had a 15 percent surcharge on top of that. We got rid of the surcharge, and this year the corporate income tax rate starts coming down too. When all is said and done, New York's corporate tax rate will be at its lowest level since 1970.

There's more. We've cut the Corporation Franchise Tax... the Gross Receipts Tax... the Real Property Transfer Tax ... the tax on motor fuel... the Container Tax... and the tax on beer.

We've cut bank taxes, insurance taxes and the Petroleum Business Tax.

And we cut the tax that had the dubious honor of being named after my predecessor: The "Cuomo tax." It was a transfer tax of 10 percent on all real estate transactions over $1 million -- a true job killer that was wreaking havoc on New York's real estate investment industry.

When Mario Cuomo signed it into law, he called it the "perfect tax."

As things turned out he was half right: It was the perfect tax for New Jersey, Connecticut , Georgia, and North Carolina. But it was a disaster for New York.

And in 1997, we did something unprecedented. We signed a law -- called the STAR Program -- that cuts school property taxes for every homeowner in New York for the first in New York State history.

This truly is remarkable because in New York, the state doesn't even levy school taxes. The localities do.

And so, essentially the state is cutting taxes that we don't even impose -- then reimbursing local governments for the lost revenue. And the reason we can afford to do that is because we've reduced the size and cost of government so

Gov. Pataki's Remarks
House Committee on Government Reform

April 15. 1999

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dramatically.

STAR is cutting school taxes by 27 percent on average. Seniors will see a 45 percent cut. And in 11 of New York's 62 counties, the average senior citizen will pay no school taxes at all.

In 1996, we not only led the nation in cutting taxes, we cut taxes by more than the other 49 states combined.

And in 1997 we cut taxes more than Texas, California and Illinois combined.

New York's Public Policy Institute, a pro-growth think tank, calculated all our tax cuts and then considered what they would mean on a federal level. They said that if equivalent tax cuts were done nationally, Americans would save well over $300 billion.

We have had great progress in New York, but there is more work to do. This year, I've proposed another $1 billion in tax cuts, including a $600 million income tax cut that will raise the threshold at which the maximum state tax rate applies, and it doubles the deduction for dependent children. Another 5 million taxpayers, including tens of thousands of small businesses, will see major savings.

Bad tax policy goes beyond bad taxes. There is the bureaucratic mindset perpetuated by these taxes. This year, I have sent the Legislature a bill that will remove one of the great absurdities from the state's tax code.

For years, hundreds of thousands of New Yorkers have had to file state income tax returns every year even though both they and the state know they will owe no income tax. It takes two minutes to figure it out.

But state law makes them file anyway. That's a waste of taxpayer's time, and a waste of taxpayers' money, because guess whose dollars go to pay for the processing of those useless tax returns?

If there was ever a tribute to twisted bureaucratic logic, this is it. By raising the taxable income needed to file a state return to match the state's standard

Gov. Pataki's Remarks
House Committee on Government Reform

April 15, 1999

Page 8

deduction, we can wipe this dumb rule off the books for good. And we'll help 500,000 New Yorkers, mostly seniors, by relieving them of paperwork they never should have had to deal with in the first place.

The states have proven that cutting taxes works. But putting tax cuts on the books is only one part of the winning formula. New York was once run by those who were quick to approve tax cuts, and then delay them, and then totally forget about them and finally turn around and RAISE taxes.

The tax-cut movement cannot be allowed to become a blip on the screen of our state's or our nation's history. The act of raising taxes is a destructive act and should therefore be a difficult act.

Last week, I joined with Congressman Joe Barton of Texas in calling for constitutional amendments that would require super-majority approval for any tax increases. At the state and federal levels, requiring a two-thirds vote for any tax increase would protect millions of hardworking taxpayers from unnecessary and counterproductive tax hikes.

I'm working in my state to get this protection passed, and I would respectfully urge the members of this committee to do the same here in Washington.

WE DIDN'T JUST CUT TAXES, WE CUT GOVERNMENT AND MORE

Our mission in New York four years ago wasn't to lead the nation in cutting taxes. Our mission was to restore freedom.

we had

To truly fulfill that mission, we knew that -- in addition to cutting taxes to eliminate the layers of unnecessary bureaucracy that those taxes created in the first place.

We knew we had to significantly reduce the size of the big, overbearing government bureaucracy that was intruding into the daily lives of our people.

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