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Tax rich, solve inequality?

By Errol Louis, CNN Commentator
January 24, 2014 -- Updated 1546 GMT (2346 HKT)
STORY HIGHLIGHTS
  • Errol Louis: NYC Mayor de Blasio, NY Gov. Cuomo tussling over Pre-K funding
  • De Blasio wants to tax rich to pay for it; Cuomo offers to fund statewide, wants to lower taxes
  • Louis: income inequality central to debate, outcome could be harbinger for national politics
  • Louis: Cuomo, with presidential aspirations, may be pressed to lighten up on anti-tax rhetoric

Editor's note: Errol Louis is the host of "Inside City Hall," a nightly political show on NY1, a New York all-news channel.

(CNN) -- Less than a month into his new job, New York City Mayor Bill de Blasio is on a collision course with Gov. Andrew Cuomo over who will take credit for an ambitious effort to extend full-day pre-kindergarten to every child in the state. What looks at first glance like a local political spat has less to do with education than with a larger, national turn toward addressing simmering issues of income inequality.

On the surface, the conflict brewing between Cuomo and de Blasio seems like a minor bureaucratic dust-up over how to fund a program. De Blasio wants to pay for pre-kindergarten and afterschool programs by imposing a 0.5% income tax increase on New York households that earn $500,000 a year or more.

Errol Louis
Errol Louis

But to levy the tax, de Blasio must get official permission from the state. And Cuomo -- who is running for re-election this year on a platform of refunding taxes, not increasing them -- is refusing that permission, but he is offering to pay for the program out of existing state funding, which at the moment shows a $2 billion surplus.

So we have two men supporting the same idea (one that is popular with voters), and there's enough money to pay for it. No problem, right?

Wrong. De Blasio has rejected Cuomo's offer, insisting that a tax on high-income city dwellers provides a more stable and reliable source of funding. Cuomo has countered by going even further, promising to lavish $1.5 billion on pre-K for the state over the next five years. The polite dispute shows no signs of going away; the New York Daily News headline writers are calling it "the Duel at Pre-K Corral."

Some of the fight is a standard city vs. state money tussle. Every year, New York City, the economic engine of the state, sends billions more in tax money to the state capital than it gets back, creating a permanent source of friction between New York mayors and governors. Adding to the tension is the fact that New York's powerful governors, operating from the upstate capital, often get overshadowed by New York City mayors, who bask in the glow of the world's financial and media capital.

But there's another 800-pound elephant in the room: De Blasio campaigned long and hard on the idea of a tax hike on the wealthy as part of an effort to cure economic inequality in New York -- what he called "a tale of two cities."

The idea resonated deeply with voters, and for good reason: No other American city comes close to New York when it comes to the vast gap between rich and poor. In 2012, in the worst days of the recession, more than 21% of city residents were living in poverty, defined as just over $23,000 a year for a family of four, in a city that also boasts 70 billionaires, and nearly 400,000 people with a net worth north of $1 million.

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Did de Blasio leave wealthy out in cold?

De Blasio's proposed solution -- a tax on the rich to pay for pre-K -- was a winner with voters, helping him garner 73% of the vote in November. It's a mandate he invokes when the tax plan is challenged. The plan is two-edged: De Blasio says early education helps start low-income children on a path to success, which is a long-term step toward closing the income gap. And the tax itself amounts to a government-sponsored transfer of resources from the rich to the rest of us.

Conservative critics say de Blasio's main interest lies in the symbolism of the tax rather than the benefits to children. "He believes in that left-wing populism. He was elected to soak those rich guys," writes columnist John Podhoretz in the New York Post. "It is his moral duty to impose that tax."

Cuomo, by contrast, has a statewide political focus that includes deeply conservative suburban, upstate and rural areas, where voters already feel overtaxed. Cuomo's 2010 victory -- and this year's re-election effort -- include iron-clad promises to lighten the state tax burden, as spelled out in the report of a hand-picked tax-lowering commission.

That arguably puts the governor out of step with unmistakable national political indictors that suggest voters are ready for government action to help poor and working-class Americans. The Occupy Wall Street movement of 2011 that quickly spread across the country was one sign; so was the re-election of President Obama in 2012 and de Blasio's victory in 2013.

De Blasio explicitly invoked the national mood in a recent speech to the U.S. Conference of Mayors in Washington, calling on his fellow chief executives to battle inequality.

"This town we're in here has been gripped in a frustrating paralysis and so it turns, we turn as a nation, to all of us, to the mayors of this country, to address the root causes of inequality," said de Blasio. That echoes a theme Obama is expected to make a centerpiece of next week's State of the Union address.

If Obama and de Blasio are right, and America is looking for a combination of substantive and symbolic actions to close the income gap, then Cuomo will be under pressure to lighten up on his anti-tax rhetoric and continue championing efforts like universal pre-K, in order to appeal to New York voters and set the stage for a future presidential run.

The actions of Cuomo, a shrewd lifelong political operator with a gift for sniffing out and riding political trends, might be the most potent indicator yet of whether or not America is about to turn a corner when it comes to making sure society's poor don't fall further behind.

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The opinions expressed in this commentary are solely those of Errol Louis.

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