ALBANY — Gov. Andrew M. Cuomo on Tuesday proposed taxing the wealthiest New Yorkers at the highest income tax rate in the country if the federal government doesn't provide the full $15 billion in COVID-19 relief the state is seeking to balance the 2021-22 state budget.
How much the state will receive in federal aid later this year is uncertain. Key legislators who want to further tax the rich now said the federal aid won't come soon enough or likely be large enough to better fund education, address income inequality and avoid Cuomo’s delay of a middle-class tax cut.
The debate over taxes on the wealthy looms as a major sticking point for New York's 2021-22 state budget, which is supposed to be adopted by April 1.
Cuomo proposed temporarily raising the top income tax rate to 10.8% for New Yorkers making $5 million or more a year. That would surpass the current highest rate of 8.8% for New Yorkers making more than $2.1 million a year. He said that would create a combined city-and-state income tax rate for the wealthiest residents of New York City of 14.87%. That would surpass California’s current top rate among states.
Cuomo said the tax would only cover revenue losses suffered during the economic shutdown forced by the COVID-19 pandemic, and could be eliminated completely if the state receives the $15 billion from Washington. Cuomo didn’t elaborate or take questions on his proposal other than to raise concerns about how it could drive more millionaires out of the state, potentially doing more harm than good.
"It feels like the governor is working hard to find ways to make the rich not pay more, and that’s an untenable position," said Senate Deputy Majority Leader Michael Gianaris (D-Queens).
Gianaris said the state’s revenue needs extend well beyond the tax losses during the economic shutdown this year to stem the spread of COVID-19. He said the working poor and middle class needed state assistance before the pandemic hit New York hard in March because the cost of living was outstripping the growth in their wages and the virus only exacerbated the problem.
Cuomo said his proposal would raise $1.5 billion. He didn’t include other proposals by the State Legislature for greater taxation of the rich and on Wall Street that legislators say could raise $5 billion or more a year to avoid cuts in services and to increase education and health care spending.
Cuomo’s budget director, Robert Mujica, said the state expects at least $6 billion from the federal government, but is seeking what he says is the full $15 billion deficit caused by the virus and the Trump administration’s failure to contain it.
The Legislature sees a broader need.
"We all hope that we get a big amount of money from the feds, but that will only backfill," said Assemb. Deborah Glick (D-Manhattan). "We have a structural issue … the overall issue is addressing income inequality."
Cuomo also proposes cuts in services if the federal government provides aid of only about $6 billion.
"It makes far more sense to raise money from those who have done well during the pandemic — most notably Wall Street — to make up the difference," said Blair Horner of the New York Public Interest Research Group.
Mujica dismissed some of lawmakers’ proposals as being unconstitutional and said collecting a tax on stock transfers on Wall Street could drive big investors out of state.
Some financial analysts shared Cuomo’s concerns.
"The proposed tax hike would make state and local personal income tax rates the highest in the nation, and would not bode well for retaining high-earning residents at a time of such great uncertainty," said Maria Doulis of the independent Citizens Budget Commission.
E.J. McMahon of the fiscally conservative Empire Center think tank said, however, that Cuomo’s millionaire tax may be inevitable because the governor needs it to pay for his proposal to raise education spending.
"By putting it on the table, he’s effectively ensuring it will happen no matter what," McMahon said.
Michael Kink of the Strong Economy For All advocacy group said he’s optimistic the Legislature and Cuomo will agree to higher taxation of the rich. He noted the idea strongly supported in polls and could fund the governor’s policy goals of addressing income and racial inequality.
"The Legislature supports it and I think the governor will, too," Kink said.