Governor Andrew Cuomo in his budget plan proposed imposing new higher income taxes on New York’s wealthiest residents if President Joe Biden and Congress do not come through with enough federal aid to close the state’s budget deficit. But, at the same time, Cuomo offered a contradictory message, saying it might hurt the state’s competiveness and cause the rich to flee the state.
Cuomo said in his budget proposal that he needs $15 billion in federal aid to ease a two-year budget deficit largely caused by the COVID-19 pandemic. If he doesn’t get that, the Democrat presented as one option, a proposal to create five new, graduated higher income tax brackets for New Yorkers earning more than $5 million a year, ending with a top tax rate of 10.82% for those who bring in over $1 billion annually.
But the governor says he fears the implementation of that plan could cause the wealthy to leave the state, defeating the purpose of the tax. He says it would raise only one-tenth of what’s needed, and when New York City’s income tax is factored in, would lead taxes to skyrocket for some of the wealthiest taxpayers.
“Which would be the highest income tax in the nation,” said Cuomo. “You’d raise $1.5 billion.”
The governor’s budget director, Robert Mujica, says the tax increases should be implemented as a last resort, and only if the federal government does not make up for the entire state budget deficit.
“If we have the federal money, then there isn’t a need necessarily to raise those taxes,” said Mujica, who says schools, health care and critical services would be fully funded.
Mujica says forgoing the tax increase would also encourage wealthier New Yorkers who have already temporarily left the state during COVID to return.
“We want to give them a reason to come back and stay,” Mujica said. “So we don’t want to do anything that’s going to impact them.”
A growing number of progressive-leaning Democrats in the Senate and Assembly disagree. They backed taxing the rich before the pandemic and the related economic shutdowns caused state revenues to plummet. And they since the pandemic started, the state’s estimated 120 billionaires have only grown richer.
Michael Kink, with the Strong Economy for All Coalition, which supports taxing the rich, says the purpose of imposing those new taxes is to help reverse the growing income inequality in New York and the nation.
“Nine out of ten New Yorkers support taxing the rich to close our budget gaps and invests in things that everybody needs, and still Governor Cuomo is resisting it,” said Kink who said the state has endured decades of “austerity budgeting,” and he says that has hurt schools, and health care, and driven up property taxes.
“The answer is to ask the super-rich, Wall Street, and the big corporations, to pay more,” he said.
Kink says the governor’s self-imposed 2 percent annual spending cap has resulted in less spending on programs that help lower income New Yorkers. He says during the pandemic-related recession, those services are needed more than ever.
“We have a million people out of work. We have hundreds of thousands of people standing in food lines,” Kink said. “Those are the folks the governor should be looking out for.”
The governor’s proposal would be also temporary, and expire in 2023. The state already has a temporary income tax surcharge, imposed during the Great Recession of 2008 and 2009. It has been extended several times.
Kink’s coalition supports a permanent increase, with the top tax bracket at 14% for billionaires. It would also begin the new, higher tax brackets at $300,000 in annual income, instead of $5 million.
Democrats hold the majority in both houses of the legislature, and their leaders are on record backing some form of new taxes on the wealthy. Senate Majority Leader Andrea Stewart-Cousins, appearing on WNYC’s the Brian Lehrer Show Thursday, put a positive spin on the proposal, saying many wealthy New Yorkers who have done well during the pandemic might want to aid their neighbors who have been struggling.
“Clearly we are in a terrible and critical situation and New York is poised, quite honestly, because of the wonderful assets of so many people who are able to help in rebuilding New York and getting out of this economic crisis, to do so,” Stewart Cousins said.
Senator Stewart-Cousins says she agrees with the governor that Congress needs to provide $15 billion in pandemic relief aid, but she says even if New York gets that amount, the higher tax brackets should be implemented anyway, to help ease inequality.
Assembly Speaker Carl Heastie made clear in 2020 that his majority Democrats back raising taxes on the wealthy.
The Democrats in the legislature won additional seats in the last election, and now hold a supermajority in both houses. If they were to approve the tax increase without the governor’s consent, they have the votes to override any potential veto.
Advocates for increasing taxes on the rich also back other proposals for raising billions more in revenue a year, including reinstating a tax on stock transfers, increasing the capital gains tax, and higher inheritance tax rates. They plan a series of virtual rallies, Zoom meetings with key lawmakers, and outdoor rallies to keep the pressure on, between now and the March 31 budget deadline.