by Bob Roman
“Ford to City: Drop Dead,” the New York Daily News headline famously proclaimed when President Gerald Ford, in October of 1975, promised to veto any legislation intended to prevent New York City’s impending bankruptcy. The New York City fiscal crisis lit the bonfire of the middle class in America and its consequences lead directly to atrocities like the poisoning of the Flint, Michigan, water supply. It was an experiment, now a fashionable practice, in putting local government under the control of an appointed board that preempts the authority of elected officials.
There are differences from then and now. For one thing, neither the organization of the Municipal Assistance Corporation to manage municipal debt nor the Emergency Financial Control Board that intervened more directly in management and policy assumed New York City’s problem was entirely the result of local incompetence. (One is tempted to ponder racism at this point, but let us continue.) New revenue was part of the solution then, unlike today when it is popular to assert that deficits can be resolved by eliminating waste and fraud. And maybe cutting taxes as well.
It’s here that Robin Hood makes his appearance. New York State has something resembling a Robin Hood Tax on the books, the Stock Transfer Tax, and it’s been on the books since 1905. There are differences in this law from contemporary Robin Hood Tax proposals. The New York tax is a stamp tax (think of the revenue stamp on a cigarette pack as an example) and the rate is tiered by price. There is a ceiling on the number of shares in a trade that it applies to and it is limited in applicability by the location of the trade. The legislation was written for the time when nearly everything went through brokers. The tax was phased out by 1981; it is now rebated immediately to the tax payer. According to New Yorkers for Fiscal Fairness, the state currently rebates something like $12 billion dollars in annual revenue from the tax.
In 1975, the Stock Transfer Tax was very much a going revenue stream, and it was one of the taxes New York State diverted to pay New York City’s bondholders. In 1976, New York collected $287.6 million in revenue from the tax, roughly $1.2 billion in 2015 money. This amount was no where near a majority of the monies required by the Municipal Assistance Corporation that year, maybe 10 to 15 percent, the rest being conventional sales taxes generated within New York City and portions of state per capita aid.
Okay. It wasn’t New York that Robin Hood helped save. It was the bondholders. It is interesting that the only time Robin is allowed on stage, even in a supporting role, is when it’s Capital’s ass in peril. But that’s capitalism. The rich get the gold. We get the pee.