A 29 percent property tax increase isn’t the way to boost public confidence in New Castle.

That’s especially true in the face of a looming national recession.

But while officials in Washington are talking about tax reductions as a means to stimulate the economy, New Castle’s city hall is proposing a three-mill tax boost.

Why does the budget of Mayor Anthony Mastrangelo call for such a huge tax hike? Fingers are pointed at a couple of culprits.

One involves lagging wage tax revenue, because the city started to collect higher amounts later in the year than budgeted. Plus, it was reported previously that the city hasn’t been particularly aggressive in terms of collecting the proper amounts of wage tax from businesses.

We also wonder if proposed wage tax collections were ever realistic. We note that this year’s budget called for wage tax collections of $2,674,000, while the same tax rate is expected to garner just $1,800,000 in 2009.

The other main cause of the city’s budget crunch is salaries, locked in place with the help of long-term labor contracts. You may recall that former Mayor Wayne Alexander and council agreed to extended contracts with most city unions. It was an obvious scheme to avoid having these unions deal with New Castle’s financial crisis as it was about to enter Act 47 distressed status.

So here’s the reality: Act 47 cannot dismiss those labor agreements. But at the same time, Act 47 requires the city to produce balanced budgets, and cover rising expenses.

That means higher taxes. It’s not complicated.

What we don’t know is how many residents and business will be unable to afford these tax increases. One of the ongoing challenges for New Castle is to demonstrate the decisions of city government are worthy of retaining and attracting people to the community.

Tax increases of this magnitude do precisely the opposite. They threaten to drive people, businesses and jobs away from the city, thus adding even more of a burden to those left behind.

As mayor, Mastrangelo inherited this situation; he can’t be blamed for what happened prior to his watch. But three members of council — Christine Sands, Karen DeCarlo and Will Quimby — were instrumental in approving the lengthy contracts that present a long-term burden on city finances.

Taxpayers should make it a point to express their appreciation to these three members of council at every opportunity.