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TAX-WEARY RESIDENTS VEXED BY IDEA OF HIKES
THOUGH GIAMBRA SEES SALVATION IN HIGHER SALES TAX, POOR AND MIDDLE CLASS WOULD BEAR BRUNT OF BURDEN

Retired maintenance man Anthony Melyshi dismissed the idea of an Erie County sales tax increase with a chuckle and a discourse on the economics of daily life.

He and his wife, Eleonore, collect a fixed income of $1,185 a month, with 30 percent of that swallowed by the rent on their federally subsidized apartment. In bad months, $200 goes for utilities, leaving a rough $150 a week for food, transportation, clothes and the other necessities of life.

So when Melyshi goes shopping, he will sometimes visit the Goodwill Industries store on Delaware Avenue, where a sturdy topcoat can be had for $8.29.

It's also where no shopper on a recent afternoon could endorse the idea of a higher sales tax to protect government services and 3,000 Erie County workers.

"It would affect me a lot," Melyshi said through his Albanian accent. "It's better to say 'too much' -- at least for poor people."

Even in the nation's highest-taxed state, Erie County cannot find the money to care for its parks, champion the arts, buttress charitable agencies, staff its libraries or provide Sheriff's Department patrols unless it raises the sales tax, says County Executive Joel A. Giambra, as he tries to plug a $130 million budget gap.

Giambra reasons that visitors as well as local residents would pay the sales tax, so it would be easier on the economy than doubling the property tax to about $900 on a $100,000 home. That doesn't include the property taxes paid to schools and villages, towns or cities.

Policy wonks, however, offer a different view. The sales tax hits the poor harder and more unfairly because they must surrender a greater portion of their limited income. It's a "regressive tax" because the less you earn, the higher your tax rate as you purchase basic needs, even though groceries are exempt.

The property tax also is considered a regressive tax because it burdens the lower and middle class more than the rich -- but not as much as the sales tax because home values often reflect income and the ability to pay.

"While a wealthier taxpayer is going to consume more . . . the sales tax is much, much less of a burden on wealthier taxpayers," said Matthew Gardner, who analyzes the tax policies of states for the Institute on Taxation and Economic Policy in Washington, D.C.

The institute found that New York's reliance on sales taxes pinches the poor and middle class more than the wealthy. New York's tax rate expects the wealthiest 1 percent of families -- with average incomes of $1.6 million a year -- to give up 9.1 percent in taxes. The poorest families -- earning less than $15,000 -- give up 12.6 percent.

Though shoppers at the Goodwill store agree the sales tax is unfair, their sentiments were most like those heard in even well-heeled suburbs: Please, no more taxes of any kind.

Service cuts preferred

Two public opinion polls of tax-weary New Yorkers found that residents, especially those upstate, prefer cuts in services to higher taxes. State and local governments take nearly $4,600 from every New Yorker, 48 percent above the national average, according to the Business Council of New York.

The Tax Foundation in Washington, D.C., says New Yorkers pay 12.9 percent of their income in state and local taxes, again the nation's stiffest percentage. The foundation ranked New York's climate for business taxes 49th, better than just Hawaii and the District of Columbia.

"All I've got is a veteran's pension and Social Security," said Russell Dotson, 80, who lives at the nearby Holling Homes, visits the Goodwill store often and recently parted with six crumpled dollars for an electric iron.

He wouldn't be willing to add another 6 cents to his purchase to pay Giambra's new sales tax. After all, he says, it's not just the 6 cents; the existing sales tax of 8.25 percent already adds half a dollar to the cost of his iron. By asking residents to add a penny to each dollar of goods purchased, the county would actually raise the sales tax 12 percent.

But the county executive, Dotson was told, can't provide vital services without more sales tax money -- $109 million more in 2005.

"I don't agree with that," Dotson replied.

New Yorkers' high taxes support the abnormally high number of workers for all local governments, school systems included. The Business Council's Public Policy Institute says the number of local government employees upstate exceeds the national average by up to 95,000 workers.

'Blown away' by taxes

Taxpayers in Erie and Niagara counties, the institute says, could save $200 million a year by shedding 4,300 local government employees and descending to the national average.

"People who have come out to our area on a relocation basis are absolutely blown away by the property taxes," said Pete Peterson, vice president of M.J. Peterson, a real estate corporation in Amherst.

"I would rather see no increase in taxes," he said, "but I think sales taxes are more fair." The owners of real estate shouldn't have to shoulder the entire burden, Peterson said.

Giambra doesn't even want to talk about raising property taxes because property owners in Erie County pay 42 percent more than the national average. With the Legislature's blessing, he cut property taxes by a third during his first two years in office, and he's now fighting off criticism that he cut too deeply.

"The thought of raising any tax, I abhor," Giambra said. "I actually think property taxes are a more regressive tax."

Plenty of people cannot afford the taxes they now pay for their homes, he says, and even the poor pay property taxes when landlords pass them along in setting rents.

A sales tax will be paid by all, even people on Medicaid, Giambra said. To him, the escalating cost of Medicaid has put County Hall into its financial squeeze. It's only right that the people who benefit from Medicaid pay something more, he said.

The Legislature would lose most of its staff under Giambra's proposed "red budget," which doesn't include revenue from a higher sales tax, so lawmakers have a stake in finding new sources of income and restoring jobs.

Spreading the pain

The Democratic majority has described blending a smaller sales tax increase, a higher property tax and spending cuts that would probably include layoffs to close the $130 million deficit seen in 2005.

The Democrats' idea requires difficult votes for lawmakers. They would have to vote to raise the sales tax, raise the property tax and issue pink slips, disappointing the potentially powerful public employee unions.

Lawmakers begin hearings on the 2005 budget today.

e-mail: mspina@buffnews.com

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