Over at New York City political site Room 8, bloggers Yoda and Larry Littlefield butt heads with Steve Malanga of the Manhattan Institute over the new New York City Independent Budget Office report showing that New York City has the highest tax rate on any big city, nearly 50% higher than the big city average.

Here's Yoda's post in full:

The City's Independent Budget Office has released a report stating that New York City residents pay much higher state and local taxes than residents of any other city in the US.

How can this be possible?

From 1994 until 2002, wasn't our Mayor a conservative and a tax cutter? Didn't he cut the welfare rolls and refuse to cave into unions. Isn't he the natural heir to Ronald Reagan. Doesn't his conservative fiscal policy mean that Republican primary voters should vote for him despite his views on social issues?

Can Fred Siegel, Steve Malanga, the other folk at the Manhattan Institute, the editorial writers at the NY Post and NY Sun explain how this could have happened?

But Yoda is turning matters on their head. The problem is that Giuliani abandoned the fight in his second term, so that the city's workforce when he took office was (slightly) larger and more expensive than that he'd inherited—and more of the debt Bloomberg inherited came from his predecessor's over-spending that from the economic fallout of 9/11. (Malanga points to the good work Giuliani did in cutting the size of government in his first term in his comment replying to Yoda's post). Bloomberg then compounded the problem by raising taxes after 9/11 to fill in the gap short-term rather than use the moment to make long-term changes. As they say, it's never a good time to quit smoking.

All this to further his vision of a "luxury city"

Bloomberg, meanwhile, used the report to launch into yet another passionate defense of his high tax/high spend policies that subsidize the politically connected members of public sector unions—who are disproportionately influential on election day—at the expense of the low taxes that could inspire independence, entrepreneurship and a private sector working and middle class.

He explained: "while I would love to reduce taxes more… unfortunately, given the level of service that the public wants, we just have to have money to pay for things. And I don't know anybody that's urging us to reduce the services." Which may say more about who the mayor chooses to know that anything else.

It's the usual math—cutting jobs doesn't earn much short-term credit from the people who finally benefit from a more efficient and affordable city, while the people who lose their jobs or now fear that their own are at risk, cry bloody murder. None of which explains why New York's government per capita spending and public sector workforce are so outsized as compared to other large cities .

Bloomberg's next quote, though, gives the game away: "My first priority is to make sure that we have the money to pay our 300,000 employees and to help those that are less fortunate than the rest of us, to help educate and protect and expand and enhance cultural institutions, [to] build for the future so we get tourists here." His priorities, that is, all involve spending tax dollars.

And surely Bloomberg understands—every mayor does, the question is how they respond—that the city's workforce is no small part a massively inefficient, almost entirely untouchable job creation program. After all, he gave it pride of place in his first state of the city speech. Since, he's learned to back off—and the taxes are part of the high price New Yorkers have paid for Bloomberg's popularity.