Long Island Tax Cut Debacle A ‘Black Eye For The Tea Party’

In 2009, Republican Edward Mangano was one of the first politicians to channel the Tea Party’s anti-tax fervor into a political victory when he knocked off Democrat Tom Suozzi for Nassau County Executive in New York State. Suozzi was a major political figure with ambitions for statewide office, and Magnano was a local legislator “given little chance of winning leading up to Election Day.”

Upon taking office, Mangano — who ran on both the Republican and Tax Revolt Party lines — made good on a key campaign promise. On his inauguration day, Mangano signed a repeal of an unpopular home energy tax, instituted by Suozzi. The tax was implemented two years before as part of a deferred-pay deal Suozzi brokered with public worker unions, which was intended to spread around the sacrifice to deal with the county’s budget problems.

In a special report, Reuters details how the repeal of that tax lead to a budgetary crisis and ultimately a takeover of the county’s finances by a state-appointed fiscal overseer. Noting that Mangano’s actions are “a black eye for the Tea Party,” the report explains how the Tea Party county executive had no plans for how to replace the lost tax revenue:

The home energy tax cost households on average $7.27 each month — a fraction of most tax bills. But in an area already paying some of the highest taxes in the country, it took on symbolic importance. [...]
[Mangano's] struggle began almost the minute he repealed the energy tax. “I’m not sure that (Mangano) understood the magnitude of the fiscal problems that he faced and he had promises from the campaign that he had to keep,” said Lawrence Levy, a dean at Hofstra University and a former member of the editorial board at Long Island daily Newsday.Eliminating the energy tax “blew a bigger hole in his budget and added to the problem with really no plan to replace the revenue,” he said.
Within two working days of Mangano’s inauguration, a letter from [the Nassau County Interim Financial Authority] landed on his desk — the opening salvo of what would fast become a testy relationship. In a two-page letter, NIFA’s chairman Ronald Stack requested a revised multi-year plan and asked Mangano how he planned to make up for the lost revenue.
He never did provide an answer that satisfied them. On Wednesday, NIFA said the county’s $2.6 billion budget was out of balance by $176 million, meaning it could take control of its finances. Mangano said he would sue NIFA….In November, Moody’s Investors Service downgraded the county and put its finances on outlook negative, citing weak liquidity and an over-reliance on nonrecurring revenues. The rating agency singled out the energy tax repeal as problematic.

A June 2010 study found that 65 percent of counties in the United States are suffering from large budget shortfalls. Reuters quotes Richard Ravitch, who advised New York City during its fiscal crisis in the 1970s, about the situation in Nassau: “It’s a metaphor for what is happening in the Western world,” he said. “People don’t want to tax but there is a point below which they don’t want to cut.”

If politicians like Mangano continue to demagogue against reasonable tax measures, many communities may reach that point and beyond. Last year, for example, the “tax-averse” city of Colorado Springs, CO shut off one third of its streetlights and laid off large numbers of public workers, including police and firefighters, after voters continually rejected tax increases.