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Former New York Gov. and now presidential candidate George Pataki has made cutting taxes one of the central themes of his political career. In fact, Pataki has repeatedly said over the years that “I’ve never met a tax cut I didn’t like.” His tax cuts largely went to New York’s wealthiest taxpayers and deprived the state of critical revenue over his tenure as governor.
Tax Record as Governor of New York
From the outset, Pataki pushed a series of regressive tax cuts including dropping income tax rates 25 percent across the board, cutting the corporate tax rate, and expanding areas with low taxes called enterprise zones, special districts with lower tax rates. These were followed by a series of cuts to other taxes, including the beer tax to the bank tax. By his own estimate, Pataki claims to have cut 19 different taxes and “saved” New Yorkers $140 billion during his entire time as governor.
Pataki’s fervor triggered a destructive tax-cutting competition with the legislature in the late 1990s when the speculative boom on Wall Street temporarily fueled state tax revenues. It was in the midst of this fiscal recklessness that the governor and the legislature eliminated New York City’s commuter income tax over the objections of New York City’s then Mayor Rudolph Giuliani, and despite the fact that the average commuter enjoyed salaries twice as high as those of the average New York City resident.
While Pataki is happy to tout his tax cuts at the state level, he conveniently leaves out the fact that these cuts meant substantial reduction in aid to local governments and schools. This actually compelled local governments across the state to increase property taxes (which are significantly more regressive than the state-level income taxes) to make up the difference, with lower-income school districts bearing even more of the brunt.
The damage to the state’s public investments did not end there. The tax cuts meant devastating cuts to the Metropolitan Transit Authority’s capital spending. Just a few years after Pataki’s final term, lawmakers had to pass a massive financial rescue of the MTA system.
The consequences of his irresponsible tax cutting would have been even more devastating, but two things helped cushion the impact. First, in 2003 state lawmakers overrode a veto by Pataki and enacted income tax surcharges on taxpayers with incomes over $100,000 to help cover the substantial state budget gap caused by the early 2000s recession, corporate financial scandals and the aftermath of the 9/11 World Trade Center attacks. In addition, Pataki’s tax cuts were aided by the run-up in the stock market during his early years as governor, which provided a larger base of revenue.
It is also worth noting that Pataki sold his tax cut along classic supply-side lines, meaning that he argued that tax cuts would jumpstart the economy to such an extent that they would be well worth it. After all was said and done however, Pataki’s tax cuts are yet another example of how tax cut-driven economic growth strategies always fall flat.
Record as a National Figure and Candidate for President
During his time as governor and in the years since, Pataki has staked out several positions on federal tax policy issues.
Pataki has explicitly staked out a position against the creation of a national sales tax. The resolution that he endorsed makes a federalist case against the tax, pointing out that the sales tax base has historically been “reserved for and relied on by state and local governments.”
Despite his experience running up the debt in New York, Pataki attempted to stake out a position as a deficit and debt hawk in 2011 by starting an advocacy group called “No America Debt.” While his group was supposed to be anti-debt, the reality is that it was counter-productive to this effort in that it advocated against any form of revenue increases as part of an ultimate debt reduction agreement, a position rejected by most of the public.
In the early stages of his candidacy for president, Pataki has been vague about his vision for reforming the federal tax system, crucially leaving out whether he believes more revenue should be raised through tax reform. His announcement speech, for example, noted that the tax code should be replaced with one that is “simpler” and has “lower rates that are fair to us all.” While this says very little about what he would actually do in real terms, he did go a step further at an event in Iowa where he said that he would eliminate virtually all tax exemptions and credits with the exception of the mortgage interest deduction and child tax credit. The key question is whether Pataki would really advocate eliminating very popular tax breaks like the charitable deduction and how he would structure any sort of tax rate reductions. Without knowing this, it’s impossible to know whether he would seek a tax reform that would be revenue reducing and how it would impact the distribution of the tax code.