CAGW Names Sen. Charles Schumer Porker of the Month
WASHINGTON--(BUSINESS WIRE)--Citizens Against Government Waste (CAGW) today named Sen. Charles Schumer (D-N.Y.) its May Porker of the Month for attempting to use the tax code to earmark a $2 billion subsidy for a commuter rail between Manhattan and the JFK airport. Sen. Schumer wants to take advantage of the New York Liberty Zone (NYLZ) tax credits, which were intended to stimulate the redevelopment of downtown Manhattan after 9/11, for a rail project that has been under consideration since well before 2001.
“could raise concerns under the [Constitution’s] Uniformity Clause because it explicitly provides a tax benefit based on a geographical classification.”
Sen. Schumer added the project to Senate Amendment 4585 to the FAA Reauthorization Act of 2007 (H.R. 2881). After questions were raised about the number and controversial nature of the non-aviation-related spending items tacked onto the bill, it was withdrawn from consideration. Congress is expected to return to the legislation before the end of June, but members may at that time have an opportunity to vote on a substitute FAA modernization bill introduced by Sen. Kay Bailey Hutchinson (R-Texas) which would deal only with aviation issues.
On May 1, Sen. Schumer said on the Senate floor that the project “is not an earmark, this is not a specific project.” However, the Senate Finance Committee report published November 13, 2007 determined that the project is a “limited tax benefit,” or earmark. There are constitutional questions as well. A Congressional Research Service (CRS) memo dated April 30, 2008, says the earmark “could raise concerns under the [Constitution’s] Uniformity Clause because it explicitly provides a tax benefit based on a geographical classification.” The Uniformity Clause says that “all Duties, Imposts and Excises shall be uniform throughout the United States.”
Since Sen. Schumer has been pushing this rail project since 2005, he is likely to insert it as an earmark into an appropriations bill. This use of the tax code to provide a grant to a locality to fund a specific infrastructure project would be unprecedented and could potentially invite a flood of similar maneuvers from members of Congress who want to earmark funds for infrastructure boondoggles. The funding mechanism envisioned by Sen. Schumer and his allies to fund the project is so convoluted, it might be best to defer to experts from lower Manhattan to explain it. According to a December 6, 2006 Wall Street Journal editorial:
“What makes this project especially objectionable is the creative financing conjured up to pay for it. This earmark hangs like a Christmas ornament from a must-pass bill to extend certain annual tax credits. And how's this for a misnomer? The subsidy is called the 'New York Liberty Zone Tax Credit.' Here's how it would work: New York would receive up to $2 billion over 10 years (about $1.3 billion of which is Sept. 11 money, for a net new subsidy of $682 million).
“Of course, New York City doesn't pay federal taxes, so this bill allows the Big Apple to retain the employer share of the payroll taxes that the city collects on behalf of its public employees ... The result: a new $2 billion hole in the budget.”
For manipulating the tax code to push for a $2 billion earmark unrelated to the original purpose of the NYLZ tax credits, CAGW names Sen. Charles Schumer its May 2008 Porker of the Month.
Citizens Against Government Waste is the nation’s largest nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government. Porker of the Month is a dubious honor given to lawmakers, government officials, and political candidates who have shown a blatant disregard for the interests of taxpayers.