Poisoned Apple: Unions Taint NYC’s Economy

The Competitive Enterprise Institute’s recent video “The Life of Julius: How Unions Hurt Workers” demonstrates how unions lead to higher taxes. Many scoffed at this notion, but guess who agreed? New York City Mayor, Michael Bloomberg.

During Thursday’s budget plan presentation, Bloomberg announced that the city has taken in an unexpected $800 million in capital gains tax revenue and an additional $200 million from corporate tax audits.

This windfall of money has come as a relief to many people. Bloomberg explained that the unexpected revenue would help the city avoid any additional tax increases or budget cuts other than those already accounted for in the preliminary budget plan. Additionally, the city would not have to let go of 1,800 teachers as originally planned.

Nevertheless, Bloomberg was not as excited as one would have expected. He explained that “the news today I think is reasonably good…as good as it’s been in a long time…the city is doing well.”

Maybe the reason Bloomberg isn’t more excited is because the city is not doing well enough to justify the salary increases that unions are demanding. For example, despite a system of automatic seniority salary increases for teachers, this past December the United Federation of Teachers President, Michael Mulgrew, insisted upon more raises. Additionally, failure to reach an agreement with the union regarding teacher evaluations before the January deadline led to a loss of $240 million in state funds, generating inevitable cutbacks.

In light of such expenses, the Mayor has tried to cut costs by proposing to unions that their members contribute to at least part of their health care cost, but of course, this was met with much resistance from the unions and their allies. For example, City Council Finance Chair Domenic Recchia (D) had her doubts about the suggestion, saying:

As a concept it’s a negotiation; it’s part of the bigger picture. You just can’t take one issue [health care costs]; it’s part of how much they’re going to get paid.

But Bloomberg disagrees, warning that “unless we do something those [union-driven] expenses will bankrupt us.” The Mayor explained that the only offset to these rising costs might be even larger cuts or skyrocketing taxes. If city workers are granted the pay increases they demand, the direct consequence could be tax hikes of up to 50 percent. And even that might not be enough to compensate for the insatiable union demands.

Though the city is doing “reasonably well,” it could have been doing extremely well had the unions not continued to demand pay increases or had they accepted Bloomberg’s proposal that their members finance at least a portion of their health care costs. If the city had more economic flexibility, then it could have been easier to avoid any spending cuts and job slashes—the very things that the unions criticize city officials for having to do.

Residents of New York State already have the highest combined tax burden in the country. Can the City really afford another tax increase of 50 percent—or more?