ALBANY — As Gov. Andrew M. Cuomo calls for federal aid to fill a projected four-year, $61 billion budget hole caused by the impact of the coronavirus, the State Legislature is weighing several measures that would, if some or all of that aid doesn't arrive, raise billions by targeting New York’s super rich.
“If Washington hangs New York State out to dry, then we must consider all our options so that we can take care of our neighbors and our communities, and invest in our long-term recovery,” said Senate Finance Committee Chairwoman Liz Krueger (D-Manhattan). “That means ensuring that those with the most are pitching in their fair share, and those with the least are not made to bear a disproportionate burden.”
Legislators and fiscal analysts say another massive federal aid stimulus to help the state is uncertain and may not come until June or July. Rank-and-file state legislators in New York said they hope to reconvene this month or in June.
The active legislative bills with Democratic majority conference sponsors include a stock transfer tax that could bring in $13 billion a year, an assessment on the mostly vacant multimillion-dollar homes in Manhattan — often referred to as the pied-a-terre tax — that could raise $650 million a year, a surtax on private equity and hedge fund managers that could raise $3.5 billion a year, ending subsidies on luxury housing development that could save $4 billion, increasing taxes on large corporations that received federal tax breaks in 2017, which could raise $1.5 billion a year, and a graduated tax on corporations whose CEOs make 100 times or 250 times the median pay for employees.
But opponents say more taxes, even for the rich, is the wrong message for one of the nation's highest-taxed states to make to employers.
"We're not going to tax our way into a sustained economic recovery," said Assembly Republican leader Will Barclay (R-Pulaski). "Democrats believe the answer to every problem is solved by increasing taxes. But when people pack up and move, when our tax base continues to shrink, what's the backup plan?"
Last week, Senate Education Committee Chair Shelley Mayer (D-Yonkers) introduced the Shared Help Assessment to Rebuild Education Act with Senate Higher Education Committee Chair Toby Stavisky (D-Queens). For two years, the measure would increase the income tax rate for earners making more than $5 million to fund public colleges and schools.
“I have not supported other legislative proposals to raise income taxes, but in the face of the pandemic, I really think it is a time of shared sacrifice,” Mayer said. “I think it’s time for those with the most to make a bigger contribution for a short period of time.”
On May 1, Sen. Jessica Ramos (D-Queens) and other prominent progressives introduced a bill with majority sponsors in the Assembly to create a tax on residents with $1 billion or more in assets.
Supporters of taxing millionaires include some millionaires.
A group of 34 millionaires called Patriotic Millionaires has proposed higher taxes for people making over $1 million a year as well as pied-a-terre tax and a tax on net assets over $1 billion.
“There’s no reason that millionaire investors who have profited the most from our state’s success should have lower tax rates than regular New Yorkers who have to work for a living,” said Morris Pearl, head of the Patriotic Millionaires.
Legislators say the tax revenue lost to the COVID-19 emergency is fueling support for the revenue-raising bills. Cuomo said the state faces a deficit in this fiscal year alone of $13.3 billion. In his daily televised news conferences, he said that without corresponding federal funding he would have to cut as much as 20% from education and health care.
Legislative sponsors of the bills to tax the rich said the measures would substantially dig New York out of its fiscal hole, make the super rich pay a fairer share, and better fund schools and health care for years to come.
“We’ll have to see what the federal government does, but one thing is for sure: We have a responsibility to provide for the health and education and other services and we intend to do that,” said Senate Deputy Majority Leader Michael Gianaris (D-Queens).
Legislative leaders said they aren’t stepping on Cuomo’s message to Washington. But State Senate Majority Leader Andrea Stewart-Cousins said “everything” is on the table, including taxes on the wealthy, and in January Assembly Speaker Carl Heastie proposed his own millionaire’s tax.
The Cuomo administration's official line is still clear: “You can’t tax your way out of a 14% revenue shortfall,” said Cuomo’s budget spokesman, Freeman Klopott. He said New York State has the nation's most progressive tax code, and that the top 5% of earners already pay 65% of income tax revenue.
"We want to make sure we remain competitive and maintain our progressive tax structure while getting New Yorkers back to work and growing our economy once again.” Klopott said.
Fiscal analysts outside state government say the need isn’t as dire as Cuomo says and new taxes might not only be unwise, but unnecessary.
David Friedfel of the independent Citizens Budget Commission said the state budget adopted in April includes billions of dollars in planned capital spending that could be repurposed and $2.6 billion already approved in federal stimulus for schools. That reduces the current deficit Cuomo pegs at $13.3 billion to a more manageable $8 billion, before tapping into rainy day funds.
“There is a valid argument for New York State getting additional federal aid, but the $61 billion number is not what the state really needs or is likely to get, certainly,” Friedfel said. “If the state does all the other things it can do, then taxes should be the last thing they look at.”
He said the danger of the legislative proposals to tax the rich would be forcing millionaires and Wall Street traders out of state.
“The state needs to be wary on the impact of its long-term economic competitiveness,” Friedfel said. He noted a taxpayer living in New York City making over $2 million already faces the second highest city and state tax income rate in the nation.
“There is absolutely no way any of these proposals could ever raise anything close to $20 billion,” said E.J. McMahon of the Empire Center think tank. “Even the relatively smallest, most plain vanilla add-on to the existing millionaire tax would be unlikely to raise more than half of the revenue estimate I’ve seen attached to it.”
The most lucrative bill would place a small tax on stock sales to raise $13 billion annually. The bill calls for a tax of 1.25 cents on a sale of a stock worth $5 or less a share up to 5 cents in tax for stocks worth more than $20 per share.
“I think the constituents in my district and on Long Island would much rather have the stock transfer tax that 90 percent of them don’t pay and not have a 20 percent cut in education,” said the bill’s co-sponsor Assemb. Phillip Steck (D-Colonie).
But Friedfel warned that the stock transfer tax “would be targeted to a very specific industry that is very mobile. That means fewer transfers are going to take place in New York State, and these things can be done anywhere."