Economic recession aside, some government expenditures are still necessary. The federal government can (at least, to a certain extent) operate with deficit financing--borrowing from others to make the expenditures that it considers necessary even when tax revenues are insufficient. (The federal government may even do this when it doesn't have to--for example, by providing tax cuts to those in higher income brackets, even though that results in borrowing to continue the planned expenditures. The first instance of deficit creation is probably reasonable in times of recession; the second is probably unpardonable (since those taxpayers with high income are the most able to continue paying taxes).
State governments, on the other hand, are in different situations. States often cannot run a deficit and must either raise revenues or cut spending. New York is the home of Wall Street and a state that has suffered considerable damage to its finances as a result of the economic havoc on Wall Street (and the smaller or nonexistent Wall Street bonuses and pay packages). So New York is apparently considering tax increases on its higher income residents to deal with its budget shortfall. See Hakim, In Albany, Higher Taxes for the Rich Expected, New York Times, Jan. 21, 2009.
The Senate majority leader, Malcom Smith, is not enthusiastic, even though polls show support for increasing taxes on the wealthy, but Senator Eric Schneiderman, from Manhattan, plans to inctroduce a bill that will "restor[e] some additional tax brackets for upper-income New Yorkers," noting that "a lot of us...feel that for the last 30 years we've been shifting the tax burden from the wealthy to middle-class families." The top rate has been cut from 15.375% to 6.85% in that 30 year period.
The other option is deeper budget cuts, which could be very detrimental to the most vulnerable residents--the sick, the elderly, children, the disabled.
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