Ayyeee… What’s Goodie Everyone. So I got some tea and it involves Andrew Cuomo and a proposal to end a deficit.
Govenor of New York Andrew Cuomo warned that New York State was facing a $15 billion deficit as he unveiled a 2022 budget proposal that raised the possibility of increasing the state income tax for top earners.
The governor pleaded with leaders in Washington to deliver $15 billion in emergency pandemic relief, but the precariousness of the situation led Cuomo to lay out two different budget possibilities: one assuming a federal aid package of $6 billion, and another with the full $15 billion.
Now if the state were to receive $6 billion, a doomsday plan would include a temporary wealth tax that would apply to taxable income above $5 million, under the governor’s proposal, with rates of up to 10.82 percent, up from the current top rate of 8.82 percent. The new rate would vary by income bracket: Those who made up to $10 million would be taxed at 9.32 percent, for example, while only those making over $100 million would be subject to the top rate of 10.82 percent, According to officials.
Embracing a tax increase, is only in a contingency plan, represented a significant shift for Mr. Cuomo, a third term fiscally moderate Democrat who has been resistant to increasing taxes on the wealthy, despite support from legislative leaders and his party’s left flank. “This budget is really the economic reconciliation of the Covid crisis, the cost of the Covid crisis,” Cuomo said during a virtual address from the State Capitol’s Red Room in Albany. “This year, it’s going to be about reconciling the responsibility of the battle and completing the battle.”
In crafting a budget for the next fiscal year, which will begins April 1, state officials face the same challenges as last year, when the pandemic devastated the economy and upended one of the nation’s largest budgets.
Robert Mujica, the governor’s budget director, said that the $15 billion represented the sum of the current fiscal year’s deficit of nearly $5 billion and the projected gap of about $10 billion in the next fiscal year.
Cuomo has said that in this scenario, the state would also have to cut about $2 billion in school funding, $600 million in Medicaid funding and $900 million in other across the board reductions.There were other question marks in the governor’s budget proposal, primarily a lack of clarity about how much money the state would have on hand because of diminished tax revenues, which Mr. Cuomo said were expected to drop by $39 billion over the next four years.
Senator Chuck Schumer(D.NY.) announced that the city and state would receive $2 billion in emergency funding related to expenses incurred as part of the coronavirus response. Schumer, who will take over as majority leader in Washington this week, has promised “better days ahead out of Washington for New York,” though he has stopped short of promising a complete bailout.
Cuomo has criticized the lack of financial aid to the state, the stimulus deal passed in December did include a variety of big dollar payments for transportation and education, as well as vaccination efforts and rent relief.
The incoming Biden administration is promising $350 billion in direct aid to states and local municipalities, as part of 1.9 trillion dollar covid-19 response plan. Even so, Cuomo maintained that without a substantial infusion of cash from Washington, the state would need to resort to a mix of tax increases, spending cuts and borrowing.
The governor also proposed up to $50 million in tax credits for restaurants and $25 million for theatrical productions, industries that have both been devastated by coronavirus.
The governor has proposed popular revenue raising measures,which include the legalization of recreational marijuana and mobile sports betting, but the projected tax dollars from those proposals could take years to materialize and would not dig the state out of its gargantuan budget hole. Mr. Cuomo’s budget would also subject short term rentals, like Airbnb bookings, to state and local sales taxes.
Cuomo said that mobile sports betting could generate about $500 million annually once implemented. Legalizing marijuana, state officials said, could raise about $350 million a year once the program is implemented in about three or four years. He proposed steering a portion of the annual tax proceeds to a “social equity fund.”
Legalization efforts have fallen apart since 2019 because of disagreements between Mr. Cuomo and the Legislature over how to allocate tax proceeds from pot sales, with many lawmakers calling for the money to be reinvested in communities disproportionately affected by the unequal enforcement of drug laws.
The governor’s proposal would increase the combined state and local income tax to 14.7 percent in New York City, the highest rate in the nation, he said. His budget would also temporarily pause the phase-in of a middle class tax cut which began in 2018.
Mr. Mujica dismissed other tax ideas floated by progressives, like a so called capital gains tax, as unconstitutional. He said the administration would not need to pursue tax increases if Washington provided sufficient aid, arguing that they could force many high income residents to flee, eroding a crucial part of the state’s tax base.
In the coming weeks, the Legislature, which is controlled by Democrats, is expected to review and present its own budget proposal, with tax increases bound to become a lightning rod issue.
“The wealthy have gotten wealthier during this crisis even as the middle class has shrunk and millions of New Yorkers have struggled to make ends meet,” Senator Andrea Stewart Cousins, the Democratic majority leader, said in a statement after the governor’s speech. “We must be ready to act as a state to advance efforts to raise revenues, including having the hyper wealthy share this burden.”