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This has been the main issue in New York State for a long time, and in the USA, where our taxes are localized to a great degree, we have microcosmic tax regimes under several layers of bureaucracy.

In New York, there has always been the problem of a very rich downstate, and an increasingly post-industrial upstate. The New York City pols complain that too much of  NYC's wealth is spent on maintaining decrepit upstate, while the upstaters complain that, first, we are saddled with NYC-style regulations and tax structure which make development here unwieldy, and secondly, our natural resources are exploited and the profits sent downstate.

The general argument upstate goes like this: let us use our own natural resources, let us create a tax structure that makes sense for us, and then we won't need any help at all from downstate.

Some of the tax provisions which create imbalances: because New York has ultra-rich people living in Manhattan, the government has to provide a very high degree of social services so that blue-collar workers can co-exist among the rich, and thereby service the city. This means the best government health care, the best social safety net, the best subsidized housing, the best wage protection, etc. For instance, for a contracting job above $50,000 non-union bids are not acceptable.

Upstate businesses are saddled with this tax structure which is extremely difficult for any form of development since we don't have the deep pockets of downstate. Even our non-profits, such as charter schools, can't afford to build new classrooms because of the regulations.

Then we have a bounty of natural resources up here, hydroelectric power and the Niagara River which runs into Niagara Falls. My area, Buffalo, is renowned as one of the first adopters of electricity in the 19th century. Today, much of the proceeds of that power are sent downstate to fund the massive public housing system of New York, and to provide cheap energy for NYC. Massive amounts of free electric are then sent to downstate businesses, some of whom have jobs subsidized by free energy to the tune of $1 million per job. Very few credits remain up here because we don't have those sorts of huge businesses, and in addition, we are hurt by the physical structure of the hydroelectric plants themselves. For instance, for 8 months of the year, a gigantic ice boom is lowered into the Niagara River to prevent ice chunks from clogging up the hydroelectric intakes. In the midst of an already cold Buffalo winter, our temperatures are dropped another 10 degrees by this natural air conditioner, thereby contributing to higher heating costs. Odd, but there it is.

None of this analysis takes into account a state regime of very high taxes (highest in the USA) and multiple blankets of local government (country government, city government, school district, all of which charge the highest taxes in the nation, through either property taxes or else through sales taxes).

I short, it seems evident to upstaters that multiple tiers of tax structures, one for upstate and one for downstate, would suit us better. In addition, a policital structure which monopolizes one regions resources and forces upstaters to pay more for energy that exists in our backyards, is also not to our benefit.

I wrote this to show that though poor regions such as my own are often big benefactors of the largesse of richer cousins in the region, there are often structural factors in the tax and political system which create these imbalances in the first place.

Consider this: if you are poor and need assistance for health care and living expenses from the state, your best bet is to come to New York where we fund social services better than any other state. But you're not going to live in New York City where the cost of living is astronomical. You're better off living in cheap upstate. Then the state mandates that 50% of all medical and social service costs will be borne by local communities. In itself, that provision is enough to bankrupt these local communities.

by Upstate NY on Wed Aug 13th, 2008 at 12:19:39 PM EST

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