December 22, 2001
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A dispatch from London in today's New York Times waddles in to follow up on Barbara Amiel's column in Monday's Daily Telegraph. Never mind that readers of the New York Times had to wait until Saturday to learn about the news that the Telegraph brought in on Monday. (And even so the New York Times won't deign today to convey directly the "vulgar term" that is at the crux of the news story.) What's really amusing is the Times's reference to Lord Black of Crossharbour, which says, "His publications, which also include The Jerusalem Post, take a very conservative line." The New York Times, which takes a very liberal line, doesn't enlighten its readers about exactly when the line is crossed between a conservative line and a "very" conservative line. In future coverage of Lord Black and his ventures -- including those in New York that involve the editor of Smartertimes.com -- watch for the Times to use "very conservative" and "conservative" as dismissive shorthand instead of actually describing the substance of the newspapers' coverage or the papers' editorial positions on issues.
News Articles: Two original, non-Times-related news articles follow:
'Dumb, Stupid, Idiotic and Moronic' Tax Increase Is Now Law
Just two months after Mayor Rudolph Giuliani called raising taxes in the face of an economic downturn and the terrorist attacks "a dumb, stupid, idiotic, and moronic thing to do," he agreed in budget talks this week with the New York City Council to raise taxes. In particular, the budget deal between the mayor and the council revives the personal income tax surcharge. The council had heavily reduced the surcharge in 2001.
Proponents of the tax increase, which will take effect New Year's Day, say it will yield additional revenues that will help plug a budget gap estimated between $3 billion and $4 billion. But the tax increase will hit New Yorkers in the pocketbook, and it could cost the city thousands more jobs in the midst of a recession that has already sent unemployment soaring as companies lay off workers and move remaining jobs to lower-cost sites. The return of the 14% surcharge on a base city income tax rate of 2.55% to 3.20% reverses a Giuliani administration policy that had steadily reduced the share of personal income that city residents pay in taxes.
"These are very tough times for the city, and to raise the income tax is sort of like pouring gasoline on the fire," an economist at the Cato Institute in Washington, Stephen Moore, said.
Still, the tax hike was welcomed by those concerned that budget cuts will run too deep. The City Council, using a static analysis that assumes the tax increase will have no negative effects on job creation or the city's population level, estimates that the tax increase will ease the annual deficit by $362 million next fiscal year. The city's Independent Budget Office puts the figure at $347 million, and some economists expect the economic downturn and the impact of the tax itself to reduce further even those revenues.
The return of the surcharge "was a terrific, unexpected development," said the associate director of the budget-watching City Project, Glenn Pasanen. "The city needs the revenues, and there was no strong rationale for cutting that tax."
The City Council was able to reintroduce the personal income tax surcharge without actually voting on it. That's because the levy is authorized by the New York State government in Albany, but the city has the option of reducing or removing it. In 2001, the City Council cut the rate for the first time since the surcharge's introduction in 1991. A pair of local laws reduced it by more than half for couples making less than $90,000, and by a smaller amount for those in higher tax brackets.
Income taxes are often controversial among economists, but city income taxes have drawn heavier criticism than most because they are so easy to escape by moving to the suburbs. New York City's personal income tax is between 2.68% and 3.32% in 2001, including the reduced surcharge. Suburbs like Westchester and Long Island have the same state income tax as New York City -- a maximum of 6.85% -- but no additional city tax, while New Jersey, Connecticut, and Pennsylvania have lower state income-tax rates, according to the Tax Foundation, a Washington-based group that argues Americans are taxed too much. High property tax rates in some suburbs complicate the overall comparison of the tax burden between New York City and the suburbs, but the property taxes, unlike the income taxes, apply only to property owners.
"When the United States government raises the federal income tax, it hurts growth but it's kind of hard for people to escape it," the chief economist at the Heritage Foundation in Washington, Daniel Mitchell, said. "When a city does it, it's like putting a gun to its head."
New York is one of a handful of cities around the country that rely on an income tax to raise revenues. Other cities levying an income tax include Detroit, St. Louis, Cleveland, and Philadelphia.
With New York's renewed surcharge in place, a couple making $90,000 will pay $235 more in city tax on their 2002 income than on their 2001 income, according to research by a senior fellow at the Manhattan Institute for Policy Research, a New York-based think tank. But the damage could extend beyond household budgets: 11,000 jobs will be lost as a result of the raised surcharge, the Manhattan Institute researcher, E.J. McMahon, warned.
The Giuliani administration had until now embraced the argument for income tax reductions. The mayor and the City Council dropped one Dinkins-era surcharge in 1998, part of a series of tax cuts that saved city taxpayers more than $2 billion between 1994 and 2001, by the mayor's calculations. The reduction in 2001 of the personal income tax surcharge was one of the last such cuts, and was "symbolic of a change in the city's philosophy of government," Mr. Giuliani told the City Council in July. "The fact that New York City imposes the surcharge, a tax on taxes, recalls the city's out of control tax-and-spend days," he said then.
The tax cuts of the 1990s helped put New York City's job growth above the national average during an economic boom for the first time since the 1950s, Mr. McMahon and others have argued. The income tax will come out of money that small-business owners could have used for investment, and it will drive businesses and residents out of the city, damaging service industries, he said. That economic damage would reduce the council's projected $362 million in annual revenues from the income tax surcharge by $30 million, and the bad economy could drive that figure down further.
The next mayor and new city council still have a chance to extend the existing reductions on the surcharge or formulate new ones. The press office of Mayor-Elect Bloomberg's transition team did not return a call seeking comment on the question. A spokesman for Mayor Giuliani did not return a call seeking comment, and the chairman of the City Council Finance Committee, Herbert Berman, also did not return a call seeking comment on the tax increase.
This week's tax hike passed largely beneath the public radar. The New York Times's subheadline on a metro-section article about the budget deal stated simply that "two planned tax cuts will not take effect." But in fact, one of those two -- the personal income tax surcharge -- had already come into effect in 2001.
"This is a tax increase," a research associate at the Citizens Budget Commission, Douglas Offerman, said. "You can't have a temporary cut in a temporary tax."
At Least One Franzen Feud Set to Rest
Mr. Franzen's National Book Award-winning novel "The Corrections" angered Lithuanians with its portrayal of their country as anarchic and impoverished, as Smartertimes.com reported on November 16. The Lithuanian ambassador to the United States wrote Mr. Franzen's publisher to complain, and a correspondent for Lithuania's biggest daily newspaper subsequently visited the writer in his Harlem studio.
Now, Mr. Franzen says he's sorry to have given offense, and he promises to visit the country. "I do understand your worry that American readers will get a false impression of your country," Mr. Franzen wrote Ambassador Vygaudas Usackas in a December 12 letter, which the Lithuanian embassy provided to Smartertimes.com. "Let me take this opportunity to assure you that I personally am fully aware that the 'Lithuania' in the novel is a product of my imagination."
The novelist told the Lithuanians that he painted a grim portrait of their country -- "chronic coal and electricity shortages, freezing drizzles, drive-by shootings, and heavy dietary reliance on horsemeat," the novel said -- to make a political point: "I have a great deal of sympathy for the former Soviet states" that were "betrayed by the excesses of American globalism," he told a reporter from Lithuanian daily Lietuvos Rytas, according to a transcript of the interview that he attached to his letter. "I exaggerated" Lithuania's "political disarray and economic woes in the late 1990s in order to tell a more vivid and compelling story for American readers."
A spokesman for the Lithuanian embassy, Rolandas Kacinskas, declined to comment on his country's alleged betrayal. But Lithuania, which has boasted a stable currency since 1994, has been a rare zone of free markets and functioning democracy in the lands of the former Soviet Union.
Mr. Franzen's conflict with the Lithuanians was a less-noticed sequel to his public feud with Ms. Winfrey, who accepted "The Corrections" for her book club and then dumped it after Mr. Franzen displayed ambivalence about being associated with the show. The novelist later apologized for his faux pas -- but in the issue of the New Yorker dated December 24 and 31, he describes feeling that the presence of an Oprah camera crew on a trip to his native St. Louis was "fundamentally bogus."
A spokesman for the Oprah Winfrey Show did not return a call seeking comment on the New Yorker article.
At least the Lithuanians have accepted his apology. "It was kind of him to get back to us," Lithuanian embassy spokesman Rolandas Kacinskas said. Now, they're hoping Mr. Franzen will keep his promise to accept their invitation to visit Lithuania.
The novelist wrote that he "will be in northern Europe next October, and would love to take you up on your invitation then. In the meantime, please know that I have the deepest respect for your country."
"We hope that he really will take away a different impression of Lithuania and it will be reflected next time in his book," Mr. Kacinskas said.
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