Waste Watch: State chooses tax rebates over tax cuts
Updated: Wednesday, July 10 2013, 02:28 PM EDT
Rochester, NY - When New York State leaders decided that taxpayers should keep more of their money over the next three years, they made a choice that mosteconomists agree is inefficient and more aimed at publicity than good government.
It's a simple choice: tax rebate or tax cut?
Beginning in 2014, most New York families will receive a tax rebate of $350 from the state.
The money will go to households that have at least one child and a combined income between $40,000 and $300,000. That's nearly 1.1 million families in the state that qualify, at an annual cost of $375 million.
Governor Cuomo touted the rebate as a way to help middle class families who "have been squeezed for a long time."
The rebate comes with bipartisan support. Democratic State Senator Ted O'Brien said, "I'm optimistic the middle class will see some tax relief." Republican State Senator Joe Robach added, "We were able to be fiscally responsible and help people to some degree all across the board."
But why wouldn't the state simply cut taxes? Why collect taxes and then send chunks of it back? Why not just collect less?
13WHAM News asked Governor Cuomo's office for a cost estimate for processing the checks and administering the rebate, but a spokesperson repeatedly declined to address it. Our estimates show that the postage alone for mailing the rebate checks will cost New York State $492,857 annually.
That's before the cost of running the rebate.
At the Center for Governmental Research in Rochester, Chief Economist Kent Gardner says it's not always fair to compare a tax cut to a tax rebate.
But if the goal is to let taxpayers keep more of their money, the choice should be a tax cut, not an annual rebate.
"If you're going to do a tax cut for the same group of people as opposed to collecting the money and then sending it back in a check, sure, let's just do a tax cut," Gardner explained. "Let's not go through this folderol of collecting the money and then turning it into a check, and then sending it right back."
Gardner points out that a payroll tax cut has a proven track record and would be a more efficient choice. He said that the parameters for who gets a rebate check this time around -- and who doesn't -- seem arbitrary.
"I think the parameters are largely a political consideration," Gardner said. "I don't think there's a lot of heavy-duty economic analysis behind the selection of the group that's going to get the rebate."
The final mark against the tax rebate is that it's going to be gone in three years, meaning families can't plan for it. Gardner says a permanent tax cut allows families to anticipate the savings; the tax rebates are not nearly as impactful.
Nonetheless, state lawmakers plan to pass out checks over the next three years, and if history is any guide, voters will see those images come campaign season.