Additional federal funds and higher-than-anticipated tax revenues balances the upcoming state budget due April 1 and wipes out the need to slash spending or raise job killing taxes, the Cuomo Administration said Monday.
State Budget Director Rubert Mujica’s update pulls the rug out from the Democratic-run Assembly and Senate, which have proposed $7 billion in taxes targeting the wealthy and businesses that critics claimed would trigger an exodus of New York’s highest-paying taxpayers and firms.
“We have identified over $5 billion in resources available that could be used to restore all of the reductions that were proposed in the executive budget proposal,” state Budget Director Robert Mujica said during a conference call Cuomo held with reporters..
“So, you wouldn’t require any significant level of tax increases to pay for the restorations,” Mujica said.
Mujica confirmed what a spokesman for powerful US Senate Majority Leader Chuck Schumer of New York recently claimed: that $12.6 billion in federal aid dedicated to state government coffers in the $1.9 trillion coronavirus stimulus package eliminated Albany’s projected deficit — suggesting tax hikes were unnecessary.
Mujica said state tax revenues also have come in $2.5 billion higher than anticipated, also helping to cancel red ink without cutting spending or raising taxes.
During the conference call, Gov. Andrew Cuomo implicitly suggested the only reasons for major tax increases are to pay for “additional needs identified by the Legislature above and beyond the COVID response measures provided for by the feds” — unrelated to a budget crisis.
“It’s just new spending items,” Mujica answered.
But embattled Cuomo, who is fighting for his political survival amid COVID-19 nursing home and sexual harassment scandals, never answered whether he would oppose or embrace tax hikes given the improved budget picture. Negotiations are ongoing with lawmakers.
Democratic lawmaker last week passed one-house budget resolutions that, if approved would hike taxes by $7 billion that include:.
- Raising the rate on millionaires (singles making more than $1 million and couples earning more than $2 million) from 8.82 to 9.85% percent, with the rate gradually topping out at 11.85% for those in the $25-50 million bracket
- A new capital gains tax of 1% on those earning more than $1 million a year; a tax on second homes in NYC; an estate tax of 20% (up from 16.5%)
- Corporate franchises, utilities and insurance companies would be hit with an 18% “surcharge” — which could be passed off to customers in higher bills.
The legislature’s proposed tax hikes would fuel a record 23 percent in spending and jack total spending to $208 billion, significantly above what the governor proposed.
Cuomo also proposed a more modest income tax hike on millionaires in his executive budget proposed in January, but that was before Albany landed an infusion of billions of dollars in federal COVID assistance.
A spokesman for state Senate Democratic Majority Leader Andrea Stewart Cousins (D-Yonkers) defended the recommended tax hikes.
“It is amazing that they found $5 billion dollars just a week after our one house budget passed. Our position remains the same: we need to ensure all New Yorkers are protected and we can pass a budget that doesn’t rely on one shots and austerity but creates long term equity,” said rep Mike Murphy.
A spokesman for Assembly Speaker Carl Heastie (D-Bronx) said, “Our families and neighbors demand sustainable solutions to problems that existed long before COVID struck, and that will require additional revenue which our Assembly budget proposal supports. We need a budget that doesn’t rely on one-shots and austerity and prepares New York for the future when this federal aid runs out. We look forward to adopting a budget that meets New York’s significant needs.”
But the head of the advocacy group representing New York City’s largest firms said raising taxes when the state is awash in cash makes no sense.
“Between federal aid and strong tax revenues, New York has no budget deficit. We have a jobs crisis, because a million workers have lost their jobs – all in the private sector, mostly with small and mid-sized businesses in the retail, restaurant, travel, entertainment and hospitality sectors,” said Kathryn Wylde, CEO of the NYC Partnership.
“The financial and professional services industries have kept tax revenues flowing throughout the pandemic, with 90% of them working very successfully from remote locations. For the economy to revive, we need these taxpayers back in the city. But there is very little incentive to return to what promises to be the highest taxed state and city in the nation.”