In the short run, local politics in the next few weeks may well have more effect on individual New Yorkers and the city's budget than November's presidential and congressional elections. Because the city must keep its budget balanced, it will have to deal almost immediately with the current financial and economic turmoil. For now, though, the mayor's push to extend term limits has obscured a full discussion of the city's tax and spending options.

Nevertheless, proposals in the U.S. Senate and House of Representative, as well as those from the McCain and Obama campaigns, make it clear that there may well be significant changes in federal tax and spending priorities that will affect New York. The most immediate revolve around short-term Democratic economic stimulus programs that could be implemented soon after the elections.

In the longer term, the McCain and Obama campaigns have spelled out, particularly on the tax side, unusually detailed descriptions of what their administrations would pursue in 2009 and beyond. They provide a rare look at - and debate about -- basic conservative and progressive policies in the 21st century. Those campaign proposals that have been analyzed recently -- and new ones come out almost daily - provide an interesting context for New York City's own fiscal choices.

STIMULATING THE ECONOMY

The Center on Budget and Policy Priorities recently analyzed the state-by-state impact of three provisions in House and Senate economic-stimulus proposals introduced in late September: extended unemployment benefits, increased food stamp benefits and new resources for states in need of fiscal relief. These, according to the center, are "among the most highly 'stimulative' policies available to Congress, primarily because they concentrate relief on those most likely to spend the money quickly, pumping dollars into an economy that needs more demand."

Because of legislation enacted earlier this year, unemployment benefits have been extended by 13 weeks. The new proposals would extend benefits another seven weeks in all states, and in the case of states with unemployment over 6 percent, another 13 weeks, for a total of 20 additional weeks of benefits in those high-need states. The center estimates that 1.4 million unemployed Americans will lose their benefits through December 2008, including 70,426 in New York State -- unless the Congress agrees to the extensions.

A temporary increase in food stamp benefits - a program fully funded by the federal government - would help offset recent sharp increases in basic food prices for 28.6 million eligible Americans. The Senate proposal would raise benefits by 10 percent, or $5.2 billion. The House proposal would increase benefits by $2.6 billion.

The report notes that food stamp benefits, because they are spent immediately, generate economic activity, so that one additional dollar of food stamps turns into $1.73 in total economic stimulus. Thus the total economic impact would be about $10 billion for the Senate plan and $5 billion for the House proposal.

Over 2 million people in New York State would benefit from the Senate and House food stamp proposals. Food stamp funding in the state would increase by $346 million in the Senate plan and $175 million in the House plan. The estimated total economic stimulus effect of the two plans in New York would be $640 and $320 million, respectively.

A third provision of the congressional plans would temporarily increase the federal share of state Medicaid spending, thus helping states avert budget cuts or tax increases. The Senate would increase federal funding for the healthcare program for low-income people by $19.6 billion over the next 14 months, the House by $14.4 billion over the next 13 months.

New York State would be the biggest beneficiary of this idea, receiving $2.65 billion under the Senate proposal, $2.44 billion from the House version. Because the city pays a substantial share of the state's Medicaid spending, this new benefit would presumably help ease New York City's budget problems. (New York City's share of Medicaid spending is projected to exceed $5.6 billion this fiscal year.)

THE CANDIDATES' TAX CHANGES

It will take longer for New Yorkers to feel the effects of any new federal tax policy arising out of the November elections. Whoever is elected, though, some state residents will benefit and others will lose from changes in personal income, estate, capital gains, dividends and payroll taxes.

The 2001 and 2003 Bush tax cuts, which McCain would continue, are currently scheduled to expire at the end of 2010. The Center on Budget and Policy Priorities issued a report in March that calculated the cuts will total $3.8 trillion if they are extended through 2018.

The $3.8 trillion in income and estate tax benefits go overwhelmingly to wealthy taxpayers. Seventy-four percent of the gains -- $2.8 trillion -- go to the top 20 percent of taxpayers. Thirty-one percent of the benefits -- $1.2 trillion - go to the top 1 percent of taxpayers (those with annual incomes above $450,000 in 2008). In 2012 alone, with the extended tax cuts in full effect, the top 1 percent would get cuts totaling $109 billion, almost one third of total cuts that year, or $67,000, on average, for each household.

Any such extension would of course have similar consequences in New York State. An October 2006 study by Citizens for Tax Justice estimated that in the 2001 to 2010 period the wealthiest 1 percent of New Yorkers (with an average annual income nearly $2 million) will receive 48.3 percent of the tax cuts, an average of nearly $80,000 a year. The poorest 60 percent will get only 13.7 percent of the tax cuts over 10 years, averaging only $379 a year. Income Taxes

An Oct. 16 Citizens for Tax Justice report analyzes the most recent Obama and McCain campaign tax plans. Both campaigns have proposed large cuts in the personal income tax. McCain's plan would cost $489 billion in 2012, Obama's, $348 billion.

The candidates' personal income tax plans have quite different beneficiaries. "Obama's plan would give taxpayers in the bottom 60 percent of the income distribution a larger tax cut, on average, than McCain's plan ($1,044 vs. $823 in 2012)," according to the report, while "The average benefits for the richest 1 percent of taxpayers under McCain's plan would be 43 times as large as the average benefits for this group under Obama's plan."

This arises largely from the candidates' approaches to extending the existing Bush income tax cuts, plus their different additional tax-cut packages. For example, McCain would extend the Bush cuts for 100 percent of taxpayers, and Obama would extend them for over 97 percent of taxpayers.

In the Obama plan, those 2.6 percent of taxpayers who have taxable income of more than $200,000 (singles) or $250,000 (married couples) would lose their Bush tax cut. The top income tax rate would revert from the current 35 percent rate to 39.6, the rate during the Clinton administration. Thus the Obama plan on the tax cut extensions would cost less -- $146 billion - than McCain's plan, $216 billion in 2012.

But both candidates have proposed big additional income tax cuts. McCain's largest one is a so-called "alternative simplified" tax, which Citizens for Tax Justice says will cost $98 billion in 2012, with 58 percent of the benefit going to the richest 5 percent of taxpayers.

For his part, Obama proposes what he calls the Making Work Pay Credit. This is a $500 refund of Social Security taxes for each working person ($1,000 for a working couple). This would cost $65 billion in 2012, with over half of the benefit going to the poorest 60 percent of taxpayers. Obama would also exempt seniors with taxable income below $50,000 from income taxes.

Both candidates offer proposals on cutting the estate tax that Citizens for Tax Justice describes as "costly and regressive," only benefiting "people who inherit huge amounts of money." Both candidates would raise the amount of an estate that would be exempt from taxes -- Obama to $7.5 million for a couple, McCain to $10 million. McCain's plan, which would drop the estate tax rate from 45 percent to 15 percent, is much more expensive ($60 billion in 2012) than Obama's ($29 billion in 2012), which would establish a 45 percent rate.

Taxing Business

Both candidates plan cuts in the corporate tax. McCain would lower the current corporate tax rate from 35 percent to 25 percent. Obama would keep the 35 percent rate, but would introduce several new business tax cuts.

CTJ notes that its study of corporate tax liability from 2001 to 2003 found that, after factoring in loopholes, the average effective tax rate for 275 of the largest corporations was less than half the statutory rate of 35 percent. Nearly a third of those corporations paid no tax at all in at least one of those three years.

The report notes finally, "The best that can be said for either of these tax plans is that they might not be fully implemented." Given the economic turmoil, it says, "the next president -- whoever he is - could decide to significantly cut back on the portions of his proposals that are more targeted to the wealthy."

THE LOCAL PICTURE

New York City, with its own budget so dependent on tax revenues generated by Wall Street, faces a more immediate fiscal problem than the federal government does. Worrying about budget deficits doesn't seem to be a priority in Washington. In fact, any federal economic stimulus package will be funded by deficit spending. The federal government will borrow even more money to pay for it.

However, the city cannot do that. It must balance its budget despite declining tax revenues. In June, long before the financial meltdown on Wall Street and in the international financial marketplace, the city faced a deficit of $2.3 billion in fiscal 2010 (beginning July 1, 2009) and deficits averaging $5.1 billion in the next two years. Those deficits will be much bigger when the mayor proposes his modification in the city's financial plan in late October or November.

Despite the enormity of the city's problems -- and in contrast to the lively national debate about conservative vs. progressive tax and spending options -- New Yorkers heard very little public discussion about the options available to the mayor and City Council until Council Speaker Christine Quinn's comment in mid October. Absent the debate, the mayor has quietly pushed ahead with conservative actions and proposals. His initial response to the Wall Street crisis in late September was to repeat last year's mid-year modification and ask his agency heads to come up with spending cuts of 2.5 percent in the current fiscal year and 5 percent in the next fiscal year. This saved roughly $1 billion the first time.

What the mayor would do next if needed, given several comments he's made, is rescind the 7 percent property tax rate that has been in effect for two fiscal years. For the last half of this fiscal year (January 1 to June 30, 2009), this would increase property tax revenues by approximately $700 million. But that burden would hit every New York homeowner or renter (renters pay a substantial part of their landlord's property tax).

An alternative would be to increase the personal income tax rate. Mayors David Dinkins and Rudy Giuliani raised the rate on this more progressive tax in difficult times. Bloomberg did as well. In his November 2002 mid-year modification, he restored a top tax rate of 4.45 percent. That top rate is now 3.65 percent.

In a speech on Oct. 15, Quinn supported the idea of an income-tax increase. ""We'll need to look at personal income tax changes, and we need to consider other ideas," she said. So far, the mayor has not publicly taken a stand on this idea.

The elite group of 30 bankers, developers and other prominent New Yorkers who have publicly supported the mayor's rescinding of term limits would seem to be a perfect group to support the mayor and City Council in a progressive, share-the-sacrifice agenda that would balance the city's economic and budget needs with the needs of the city's residents.

Glenn Pasanen, who teaches political science at Lehman College, has been in charge of Gotham Gazette's finance topic page since 2001.