The COVID-19 pandemic has devastated the world. An interconnected planet has its great advantages, but dangerous viruses can also hitchhike along aviation routes and shipping lanes to spread disease at incredible speed. Not only has the pandemic savaged the world’s public health, but it has similarly devastated nations’ finances.
New York – once the epicenter of the pandemic in the United States – has seen its state and local government budgets shredded. In the face of a rapidly spreading, dangerous virus, businesses were shut down, travel and personal spending dried up – and as a result there has been a huge drop-off in tax revenues to the state.
The state’s elected leadership hoped that cratering public finances would be offset by federal government intervention. In the meantime, the Cuomo Administration has withheld billions in state expenditures in hopes of financial relief from Washington. Monies that had been withheld would be returned to agencies that have cut state aid. If federal funds were never to arrive, these “withholds” would become permanent cuts, cuts that would total 20 percent.
Earlier stimulus packages helped New Yorkers directly and provided indirect financial help to the state and local governments. This weekend – some nine months later – the most recent stimulus agreement appears to have been finally negotiated, but it leaves state governments largely out in the winter cold.
It became increasingly obvious that there would be no Congressional rescue of the states during the Trump Administration and the pressure has been building for New York to develop permanent solutions to its fiscal disarray. New York State Assembly Speaker Heastie recently called for a special session to take place before the new year to raise taxes to offset expected cuts.
In response, Governor Cuomo argued there can be no increase in revenues unless lawmakers agree to a full, new budget. The Speaker responded with puzzlement, arguing correctly that the state’s current budget needs revenues and that revenues need to be added immediately.
So, what happens next? In Albany’s opaque system, it’s always hard to tell what is really happening. Public statements often do not reflect political calculations or private negotiations.
One thing’s for sure, there will be pain.
New York’s massive public deficits simply cannot be addressed by cutting programs; the cuts would be too deep and would harm those most in need – those who already have borne the worst of the pandemic.
The other option is to raise revenues – taxes. The governor has repeatedly said that he is concerned that taxes on the wealthy will be a problem, that the wealthy may simply up and move. What is left out in that argument is the devastation to those who rely on public support, and that without that support they will miss out on education, lose access to health care, or starve.
There is no magic bullet. Whatever the state does will cause pain. The question is, who should feel that pain the most? The people who rely on government help and who have suffered the most during the pandemic or those who have become more well-off over the past six months and who have had far less exposure to the disease?
Seems obvious – the wealthy few should shoulder the burden.
There are options for policymakers to consider. One is to increase the personal income taxes on those who make a lot of money. Neighboring New Jersey has done that. New York has done it in the past.
Another option is to collect and retain the Stock Transfer Tax. Since 1905, New York State has had a stock transfer tax which acts much like a sales tax on the buying and selling of equities. Since the early 1980s, the tiny per trade tax has been refunded to investors. While a small fee per trade, due to the high volume of speculative stock sales it adds up. During the first half of this fiscal year, New York has collected – and rebated back to Wall Street – over $4.2 billion.
That’s right, over $4.2 billion in six months – sent back to one of the few sectors of the economy that has profited handsomely during the pandemic.
The state’s finances are a mess and there is no Congressional bailout. Fortunately, two New York lawmakers – Senator James Sanders and Assemblymember Phil Steck – have introduced legislation that would allow the state to keep the Stock Transfer Tax revenues once again. The stock market has handled the pandemic very, very well. The Dow Jones Industrial Average index dropped around 8,000 points in the four weeks from February 12 to March 11, 2020, but has since recovered to over 30,000 points last week – a new record.
There are no easy answers, however one answer is quite clear: The state should keep the billions it currently taxes on the buying and selling of stocks on Wall Street. In a time of crisis, it makes far more sense to help those who need the help – not to add to their suffering.
Blair Horner is executive director of the New York Public Interest Research Group.
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