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Tax opponents wonder if they still can count on Gov. Cuomo

New York Gov. Andrew M. Cuomo speaks during

New York Gov. Andrew M. Cuomo speaks during a news conference at the New York Stock Exchange on May 26. Credit: AFP via Getty Images/JOHANNES EISELE

ALBANY — Business groups and fiscal hawks historically have been able to count on Gov. Andrew M. Cuomo to temper a progressive State Legislature’s desire to raise taxes on corporations and the wealthy.

But with the embattled governor fighting for his political life, they say there may be no stopping New York from raising some tax rates to levels not seen since the 1970s.

And that’s despite a huge influx of funds from Washington that effectively closes out New York’s budget hole.

Opponents of the tax hikes, outnumbered in the legislature, are trying to apply public pressure to halt the plans — while knowing the political tide makes this a long shot bid.

"With these billions inbound from Washington, it is ludicrous and unconscionable for the New York State Legislature to propose raising taxes while our state and region dig out of a pandemic-induced economic hole," said Kyle Strobler, executive director of the Association for a Better Long Island, a business group. "It defies common sense" and could drive businesses out of state, he added.

"These tax increases are both unnecessary and economically risky," said Andrew Rein, president of the Citizens Budget Commission, a watchdog group. "The legislature’s tax proposals present more risk than those proposed by the governor. They are larger, broader than just the personal income tax, and permanent."

At issue are budget proposals set to be adopted in the Senate and Assembly Monday which would make tax changes that would generate at least $6 billion annually. The proposals set the parameters for negotiations on a state budget, which is due April 1.

Taxes on corporations, capital gains and estates would rise under the legislators’ plans. The income tax rate for couples earning more than $2.1 million annually could jump a full percentage point, to 9.85%. The top rate, for couple earning $50 million or more (Senate plan) or $25 million (Assembly), would jump 3 percentage points to 11.85%.

That would be the highest top rate in New York since 1979, according to E.J. McMahon, a fellow with the Empire Center, an Albany fiscally conservative think tank and a former Assembly Ways and Means Committee staffer.

Cuomo, in contrast, had proposed tax hikes just for a small percentage of high earners and gave the tax an expiration date. He signaled the proposed hikes are a concern for him.

"If you’re not careful the way you do it, you may actually lose money for the state, because business and residents will make changes," Cuomo said, implying people and companies could leave the state.

Under the legislators’ proposals, the state’s overall budget would go past $200 billion for the first time, up from $193 billion. The Assembly’s version approaches $207 billion.

Critics contend no tax hikes are needed at all, thanks to a Biden administration stimulus plan sending $12.6 billion to the state government and another $10.8 billion to cities, towns and villages. That, along with steady increases in ordinary tax revenue, has wiped out most of New York’s projected budget deficits for the next several years, Rein said.

But the majorities in both houses, along with progressive activists, say structural tax changes are still needed because the federal aid is just a one-time influx. It would send more money to schools while also providing grants and commercial rent relief to small businesses still struggling to survive the pandemic.

"Our budget must meet the moment," Assembly Speaker Carl Heastie (D-Bronx) said.

They also say it would reverse a two-decade trend in the state to generally lower taxes on high incomes and corporations. They say it’s a scare tactic to say the wealthy or businesses will flee the state.

"The legislature’s proposals recognize the need for support to ensure all New Yorkers can live, work, access health care, and receive a sound education," the labor-backed Fiscal Policy Institute said.

The governor typically controls 90% or more of what gets into the budget. But Cuomo is in a weaker political position this time, facing an impeachment inquiry, an attorney general’s investigation and a federal investigation over sexual harassment allegations and nursing home issues.

Further, he is facing a more united legislature.

Democrats control veto-proof "supermajorities" in the state Senate and Assembly and "relations between the legislature and governor are strained, to say the least, now," McMahon said. The governor could issue line-item vetoes to strike down taxes and spending, but that comes with a political risk.

Said McMahon: "Even if Cuomo can make a veto (or veto threat) stick, and if the final budget deal doesn’t include this whopper of a soak-the-rich tax hike, many in the targeted class of high earners could see it as a harbinger of things to come."

State & Region