The state’s 2021-22 budget negotiations will wrap up in the next three weeks. The stakes are higher than usual for New York City and Long Island, whose residents generate 68% of state personal income tax revenues.
Throughout the pandemic, political pressure has been building on Albany legislators to "tax the rich" — ostensibly as retribution for how well the stock market and Wall Street performed in 2020. The menu of proposed taxes includes increases in personal and corporate income taxes, a tax on stock market trades that would largely fall on retirement savings, a new tax on capital gains, and an inheritance tax on estates as small as $250,000. There is also a wealth tax on the assets of billionaires, which would likely leave New York without any.
No one can lack sympathy for the losses that many New Yorkers have suffered because of COVID-19. The state is down more than 850,000 jobs and thousands of small businesses have been forced to close. More than a million New York City office workers have been working remotely during the pandemic and many will not return on a full-time basis.
Raising taxes will not fix these problems, it will make them worse. The additional tax burden will fall on Long Island and New York City, which have been responsible for 90% of the state’s job growth over the past decade. Our region not only pays the most income taxes in the state, but Nassau and Suffolk residents also pay some of the highest property taxes in the country. As a result, downstate residents already suffered a huge tax increase in 2018, when the federal government capped the deductibility of state and local taxes, also known as SALT. This has increased the tax burden on New York’s high earners by an estimated $12 billion a year, coming largely out of our downstate counties.
There is no need for budget cuts or justification for tax increases this year. The U.S. Congress is enacting a $1.9 trillion COVID-19 rescue plan crafted by the Biden administration and New York’s own Senate Majority Leader Chuck Schumer. It will send an estimated $70 billion to our state, which is enough to fill the state budget gap, restore our schools, and jump-start economic recovery if we invest it wisely.
Financial and professional services and the other industries that were able to operate remotely for the past year have sustained the New York economy and kept tax revenues flowing. State Comptroller Thomas DiNapoli reports that tax receipts in the state are significantly higher than expected — $4.4 billion higher than projected in the 2020 budget and $1.7 billion above projections in the three months since the release of the executive budget.
As the COVID-19 vaccines take hold and economic recovery gets underway, there will likely be a need for additional state spending to adapt our infrastructure, education and health care systems to the demands of a post-pandemic world. Hopefully, when that time comes, Washington, D.C. will have lifted the cap on SALT, many remote workers will have returned to the region, restaurants and retailers will be reopened and tourism will be on the rise.
Until we reach that time, the taxpayers of downstate cities and suburbs should speak up and let their legislators know that restoring jobs and retaining talent, not punitive tax increases, must be New York’s top priority this year.
Kathryn Wylde is president and chief executive of the Partnership for New York City.