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Questions remain on Cuomo's $2B tax cut plan

Gov. Andrew M. Cuomo outlines his plan to

Gov. Andrew M. Cuomo outlines his plan to provide more than $2 billion in tax relief to New York's families and businesses. (Jan. 6, 2014) Credit: Office of the Governor

Gov. Andrew M. Cuomo's $2 billion tax cut proposal announced this week is based on a surplus at a time the state still has a deficit, assumptions that some financial analysts find shaky, and spreads out much of the promised benefits over several years, according to fiscal and policy experts.

"Based on the available numbers, it doesn't come close to adding up," said E.J. McMahon, president of the Empire Center for Public Policy, a fiscally conservative Albany think tank.

"The question remains, how is this going to be affordable?" said Elizabeth Lynam of the independent Citizens Budget Commission.

On Monday, Cuomo unveiled his tax cut proposal, which will be a major element of his State of the State speech Wednesday and his 2014 re-election campaign.

Cuomo said the state will reap the benefit of reduced spending while tax revenue rebounds in the economic recovery, creating a surplus. He would freeze property taxes and offer a state subsidy to schools and local governments that abide by a 2-percent cap on spending and share services to cut costs.

"Over the past three years, we have made unprecedented progress toward curbing the rise of taxes and government spending in New York, transforming a state budget with a $10 billion deficit to a $2 billion surplus," Cuomo said Monday.

But the administration's midyear financial plan still projects a $1.7 billion deficit at end of the fiscal year on March 30. A surplus won't materialize until the 2016-17 fiscal year, according to a report by a Cuomo tax commission last year.

The state's latest cash report also found state revenues running $590 million below budget expectations in November.

Cuomo's tax cut proposal depends on the expiration in 2017 of a $2 billion-a-year temporary income tax increase on New Yorkers making over $1 million a year.

But the "millionaire's tax," which Cuomo opposed in the 2010 gubernatorial campaign, was extended for a second time in the spring, avoiding action this election year.

McMahon said Cuomo's tax cut will be funded in part by one-shot initiatives already in the state's financial plan, such as postponing $1 billion in pension payments.

"The math may work," Lyman said. "But that's a lot to assume. There will be tremendous pressure from the legislature to spend."

However, Cuomo has reduced the growth in state spending to 2 percent a year -- a fraction compared with past years. That will help create a surplus if tax revenue grows faster than 2 percent. But Cuomo also has committed to approximately 4-percent increases each year to the two biggest items in the budget: Education and health care.

State Comptroller Thomas DiNapoli said holding spending to 2 percent won't be enough to avoid a deficit and enable tax cuts, but he wants to see Cuomo's budget details.

Even Cuomo offered a caution.

"We have gone through so many ups and downs that I'm not going to venture a guess as to where the economy will be in Year Three" of the tax-cut plan, he said Monday. "But I can tell you this: If we keep doing what we're doing . . . I think we are going to be in a strong financial position."

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