McMahon: Andrew Cuomo should block Bill de Blasio's tax hike

Bill de Blasio seems poised to waltz into Gracie Mansion largely on the strength of his proposal for a soak-the-rich income tax hike.

But the tax increase would need approval in Albany, where Gov. Andrew Cuomo wants to position himself as a moderate tax-cutter for his 2014 re-election bid. So the governor is doing his best to discourage de Blasio, warning that a city tax increase would prompt wealthy New Yorkers to flee to Florida.

In fact, Cuomo's own position on income taxes has flipped 180 degrees since 2011. Then, after running on a no-tax-hike platform, he extended a temporary "millionaires' tax," raising the state's top rate by more than twice as much as de Blasio is proposing for the city. And this year, Cuomo extended that tax hike again.

Assuming de Blasio wins, it wouldn't be a shock to see Cuomo shift gears and try to find some way to placate the new mayor -- and his progressive base. Unfortunately, given the governor's other emerging priorities, a split-the-difference approach will still leave the two New Yorks with weaker fiscal and economic prospects.

Cuomo has signaled he wants to propose some form of state-subsidized "property tax relief" for homeowners in 2014. But this would tap more deeply into state income tax revenues -- disproportionately generated by the same high-income city residents targeted by de Blasio's tax hike.

To win legislative approval of a property tax subsidy mainly benefiting upstate and the suburbs, Cuomo might offer New York City some combination of small, symbolic city income tax breaks and added state money for the pre-K program de Blasio's tax hike is supposed to finance.

But this would require some fancy fiscal footwork, since Cuomo would need to more tightly cap all other spending, which in turn would create more tension between the governor and the next mayor. Both need to recognize that an expansive vision of government -- a vision they fundamentally share -- can't be paid for without strong economic growth, which won't be encouraged by high marginal income tax rates at the city or state level.

Cuomo should just say no to de Blasio's proposed city tax hike -- and start phasing out the state's higher top income tax rate while he's at it.

E.J. McMahon is senior fellow at the Manhattan Institute's Empire Center for New York State Policy.