"I believe in tax cuts. I believe in being a supply-sider. I cut the income tax I think it was 24 percent. We got 42 percent more revenues."
Rudy Giuliani on Tuesday, October 9th, 2007 in Dearborn, Mich.
Update: Giuliani pushed city income tax cut
Updated: Rudy Giuliani is deft at cherry-picking statistics to make his case and he's not one to share credit, either.
But he does have a record of performance that can be examined. The claim made in Dearborn is an oft-analyzed, widely debated example.
In our original posting on this issue, which we declared "Barely True," we focused on his use of "I," which is indeed technically untrue. It takes the mayor, the city council and the state legislature to cut that income tax. But after hearing an appeal from the Giuliani people, we think he deserves the benefit of the doubt on this.
The tax cut he refers to clearly was a Giuliani initiative, and in the same way that we refer to "Reagan tax cuts" that were studied, modified and approved by Congress, we have concluded that Giuliani's initiative on this is clear enough to be lenient in judging the "I" claim. We also erroneously stated that this is a state income tax, and while it must be approved by the state, it is a separate city income tax.
And 24 percent? Giuliani likes to use percentages of percentages. It doesn't sound like much to say the top-bracket tax rate fell from 4.46 percent to 3.54 percent during his tenure. But okay, the math works. Since personal incomes were also rising, it's not necessarily the case that New Yorkers saw a reduction in their total tax bills. But the rate went down 24 percent.
We want to note that the same report reflecting the 24 percent reduction shows that the rate was even lower, 3.4 percent, in 1989, the end of the Ed Koch administration. (It was raised again during the David Dinkins administration.) Okay, so we're getting addicted to our calculator.
Which brings us to that "42 percent more revenues."
The 42 percent figure for revenue growth, just to complete the documentation, is a comparison of revenues from the city income tax from Giuliani's first full fiscal year, 1995, to his last, 2001. That's a very reasonable way of counting.
But to link the revenue growth to the tax cut brings us into the world of supply-side economics. With tax-cut advocate Steve Forbes, of the magazine family, as an economic adviser, Giuliani keeps claiming that "his" tax cuts created the growth.
"When you reduce the burden of government," Giuliani said in Des Moines on June 20, 2007, "what happened is the unemployment rate was cut in half, the number of jobs grew ... the number of people that were working went up dramatically, and new businesses came back to the city."
So let's just pause on supply-side economics, the popular version of which is that reducing the tax rate actually increases the tax revenue by giving people more incentive to produce income. But how much is tax-cut incentive, how much is sheer greed, and how much is the rising tide of a booming economy? Who knows? One sign that something else is involved is that during the years in question the revenue increase ranged from 41.4 percent in Queens to 60 percent in Brooklyn.
We have changed our ruling since this item first published in November 2007. We understated Giuliani's role in the city income tax cut, and we simply misstated the origin of the tax that was in question. Upon further review, in light of clarifying information provided by the Giuliani campaign, we are giving Giuliani a Mostly True ruling.