Cuomo warns of tax hikes, dramatic cuts if federal government can’t find $ 15 billion

ALBANY, NY – New York Governor Andrew Cuomo had an overarching message on Tuesday as he delivered his annual New York State Capitol Budget speech: If Washington does not send New York 15 billion dollars as part of a pandemic relief program, it will have no choice but to cut public payrolls, cut services and raise taxes for the rich.

Cuomo argued that the state is only entitled to these funds because the pandemic hit New York so hard last spring and was comparatively defenseless thanks to the clumsiness of the federal government.

“New York has paid a bill for Covid that no state in the country has paid and it’s not even close in many ways,” he said. “The remaining cost is $ 15 billion.”

He went further and threatened to take legal action if the federal government did not grant his request, although officials, when asked, did not immediately tell who the State could sue or what legal arguments New York could use.

At the moment, however, it is uncertain whether the state will get what it asks for, and its new budget, due at the end of March, reflects this uncertainty. “We don’t know, in short, what level of aid we’re going to get, but the budget depends on that number,” he said.

The total amount would mean New York could avoid excluding its localities from the aid allocated to them, offer relief to small businesses and restaurants, focus on education and workforce issues and get on the road to recovery, he said. Anything less, he said, would be an affront to the suffering the state has endured as one of the first to be overwhelmed by the pandemic, calling it “the 2021 version of the federal government saying ‘drop dead “At New York”.

Still, Cuomo’s budget manager Robert Mujica said the state was adopting a plan focused on a much smaller number – around $ 6 billion – at least on paper. Mujica said this was the bare minimum the state would need to consolidate its accounts. “I’m pretty confident – unless everyone is telling the truth – we would get that amount,” Mujica said of the $ 6 billion. But, he added, “fifteen [billion] is the fair share. “

Until anyone in Washington tells them otherwise, the budget plan Cuomo now has to negotiate with legislative leaders will include a tax hike on the state’s wealthiest income with five temporary surtax rates starting for those who earn $ 5 million or more. The new maximum rate would be 10.82% and taxpayers could prepay their supplements for fiscal years 2022 and 2023 now for a corresponding deduction in fiscal year 2024.

It would also delay a planned middle class tax cut that began in 2018 and was slated to be phased in by 2025 by one year.

The surtax – which Mujica says would bring in around $ 1.5 billion – would align the governor with Democrats in both legislative chambers and progressives advocating for low-income communities who have long demanded only the highest incomes in the state pay more. Cuomo has constantly warned that such a move would result in the departure from the state’s rich tax base. And Mujica said if the federal government gets more funding, such a move won’t be so much of a priority.

Supporters of raising taxes on the rich remain suspicious of the governor’s plan. On the one hand, the top bracket of wage earners – those who earn more than $ 100 million a year – would likely be made up of around 118 people, said Michael Kink, who heads the Strong For All advocacy coalition, which pressure for more aggressive tax measures.

It’s too small a group to charge what Cuomo and Mujica called “one of the highest rates in the country,” Kink says.

And the tax hawks aren’t clear on the prepayment option. Many of the high earners affected by the surtax might be cautious about the prepayment option, noted EJ McMahon of the Empire Center, as future earnings will be particularly difficult to predict. The incomes of top earners are always volatile because they are often based on investment gains, he said, and the next few years will be particularly difficult to estimate because federal tax changes are possible.

There are other measures to close the gap between the $ 15 billion Cuomo wants and the $ 6 billion he fears he’ll get, including continued (albeit smaller) withholdings on aid spending. community, education and health care, Mujica said. Cuomo has also been pushing to legalize adult-use cannabis and mobile sports betting for a combined revenue gain of around $ 850 million, but it will take years for the two to be fully integrated and lucrative enough to make a difference. .

Adding to the uncertainty is an impending deadline. The new budget is due at the end of March, and while that deadline is notoriously “flexible,” Congress and the White House are expected to act unusually quickly to ensure that any amount goes into the state plan. .

A radio host asked Cuomo on Tuesday night about the backup’s back-up plan if Congress fails in time.

“Do not even think about it. I don’t even want to think about that possibility, ”Cuomo said.