This post derives from two articles in Left Voice: one authored by Scott Cooper, and entitled What's Next: Stimulus or Austerity? The second, by Olivia Wood, is New York Postpones Raises for Public Employees; CUNY Workers Push for a Strike. As Left Voice's core is a collective of New York City college professors, they know their subject matter, and as a retired professor myself the topic is of considerable interest. The integrity and competence of both authors is beyond question and the articles are worth your time.
Here is Mr. Cooper's lede idea:
The cuts are everywhere, thanks mostly to plunging tax revenues. States rely on taxes to fund their budgets that come, overwhelmingly, from two sources: income taxes, which don’t get paid if people don’t have jobs; and sales taxes, which are not forthcoming if people have little or no money to spend. …
His solution is to tax the rich, and he documents in some detail how the rich are frequently taxed at a lower rate than the middle class.
Unless it prints new money, federal government funds — and those of state and local governments, for that matter — are overwhelmingly what has been collected from the vast majority of people, the working class. As New York Times columnist David Leonhardt has pointed out by the numbers, the wealthiest pay taxes at much lower rates than the rest of us. And we don’t enjoy any of the numerous loopholes that have been established to help them get away with paying less and less and sometimes even zero.
And true enough, and in fact it's even worse than Mr. Cooper imagines. The very poor, i.e., those receiving welfare benefits, are often taxed at rates exceeding 100% (e.g., they lose food stamp benefits if they're $1 above the cutoff). There is obviously something wrong with welfare, leading many to propose getting rid of all the individual benefits entirely and replacing them with a negative income tax or a universal basic income.
But at the end of the day, it's all irrelevant. Because the big issue isn't the rate at which income is taxed, but rather the total amount received in taxes. And by this measure income taxes are highly progressive, as this chart shows.
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That's for federal taxes, nearly 70% of which are paid by the top 10% income earners. Relevant here are New York State and City income taxes, which are even more progressive than the Feds. As shown below, over 50% of New York state tax receipts come from the top 1%, and nearly 80% comes from the top 10%.
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Of course income taxes are not the whole story. There are payroll taxes, overwhelmingly paid by the middle class, for whom the primary beneficiaries are also the middle class. This does not seem unfair. Then there are sales and property taxes, which are undoubtedly regressive.
In light of this, raising taxes on the rich doesn't make too much sense. If they're already paying 70% of the tax haul, government is already dependent on the whims of only a few people. These people are the most mobile folks on the planet, and can easily move out of state or even out of the country. Indeed, the NY Post reports that nearly 300,000 people fled the state in the eight months ending Oct. 31st. These are upper income folks who are taking a big slice of AGI with them.
I'll suggest that tax rates are already adjusted to maximize revenue. Adjust the rates either up or down, and actual tax receipts will decline--the former because rich people can move, and the latter because you're just leaving money on the table.
If Mr. Cooper is worried about the revenue stream, Ms. Wood cares more about how the money should be spent. The meat of her argument is summarized in the last paragraph.
New York City, New York State, and CUNY have all been looking to Washington for some kind of relief. They say these cuts and budget shortfalls are temporary, and federal funds from a Biden administration will save us. But workers should not hold our breath. Instead, we must organize, within our unions, across unions, and with the un-unionized, to demand relief that benefits the workers, not the governments and the capitalists. This includes preparing our unions to take citywide strike actions to fight the wave of further austerity that is sure to come.
Are the budget shortfalls temporary? Probably not, and for several reasons. First, as said above taxpayers are leaving the state and taking their AGI with them. Second, and more important, the economy is recovering, but to a different economy.
“We’re recovering, but to a different economy,” [Fed chair Jerome] Powell said during a virtual panel discussion at the European Central Bank’s Forum on Central Banking.
The pandemic has accelerated existing trends in the economy and society, including the increasing use of technology, telework and automation, he said. This will have lasting effects on how people live and work.
So what are the effects on higher education? I can count a few.
- More students are learning online. Some of them will prefer it and will not go back to the classroom. Online education got a permanent boost.
- Students expect online education to be cheaper and are less willing to pay high tuition. Beyond which, online students have no need for dorm rooms, cafeteria food or athletic facilities--all of which are major revenue sources for colleges.
- Working from home reduces the need for office space, managers, and overhead. Ultimately, it reduces the benefits of a college degree. For that and other reasons, including automation, the demand for college grads likely decreases over time.
- Likewise, working from home expands the labor pool available to the employer. Their candidates can live in Topeka as easily as in Manhattan. Wages will accordingly trend lower.
- Not pandemic related, but still important, is the demographic cliff--the cohort of high school grads will be much smaller in coming years.
This week, rank and file organizers at CUNY are bringing a Cross-Campus Resolution for a Strike Authorization Campaign and Vote to the floor of the PSC’s Delegate Assembly.
Who are they going to strike against? Surely not against the CUNY administration, because at the end of the day they don't control the purse strings. And also not against the state or city government--for not only can they not control the purse strings, but they've got all kinds of other social services they need to fund.
The faculty probably intend to strike against the millionaires and billionaires, who generally don't give a rat's patoot about CUNY. Why should they? Certainly the ones who have already left town have washed their hands of the whole problem.
So ultimately our faculty friends are striking against their own students--the ones who are at least paying a fraction of the bills. This seems perverse--and deeply counterproductive.
The whole higher education edifice is overbuilt and needs to shrink. We need fewer colleges, fewer professors, and a whole lot fewer grad students. One hopes it can happen gradually so that people could adjust their lives over time. But the world is never like that. As Hemingway put it,
“How did you go bankrupt?"
"Two ways. Gradually, then suddenly.”
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