Wall Street Journal: Cuomo, New York State Lawmakers Head for Clash Over Tax Increase

Originally published in Wall Street Journal on January 25, 2021.

Senate Majority Leader Andrea Stewart-Cousins says she would push for the hike regardless of federal funding amount

The debate about raising taxes as part of New York’s budget is shaping up to be a test of how far Democrats in the state Legislature will go to take on their party mate Gov. Andrew Cuomo.

After last year’s elections, Democrats have the two-thirds majority in both the state Assembly and Senate—enough to override a gubernatorial veto. Advocates of raising taxes are pushing rank-and-file lawmakers to flex their muscles during the budget process, which will dominate the Capitol until the next fiscal year begins April 1.

 

Mr. Cuomo proposed a $193 billion spending plan that includes $1.5 billion from raising taxes on people reporting $5 million or more in annual income. But one breath after describing the plan, he fretted about its potentially negative consequences if wealthy people leave the state. Mr. Cuomo said the plan can be avoided if the U.S. Congress approves more aid for the state.

Senate Majority Leader Andrea Stewart-Cousins, a Democrat from Yonkers, said last week that she would push for a tax increase regardless of the amount of federal funding. Assembly Speaker Carl Heastie, a Democrat from the Bronx, has previously voted to approve tax increases and fruitlessly pushed to boost rates in December.

 

If neither side budges, the result could be the first bicameral veto override during Mr. Cuomo’s three terms in office.

“We’re going to assert ourselves and see where that takes us,” said Deputy Senate Majority Leader Mike Gianaris, a Democrat from Queens. “We have some tools at our disposal, and we intend to take advantage of them.”

Many legislators have groused for months about feeling diminished since the Covid-19 pandemic forced them to make most of their operations virtual. They approved a law in March that gave Mr. Cuomo unilateral power to issue directives related to the pandemic emergency that had the force of law.

 

Mr. Heastie insists that he hasn’t ceded power, explaining that his chamber passed a law in the last week of 2020 to extend eviction protections not just because they believed it was sound policy but also because “legislators want to show that they want to do their jobs.”

A group of unions and activist groups has been steadily pushing for higher taxes to fund schools and other social programs, and say New York lawmakers should impose new levies on financial transactions and wealth in addition to the income-tax surcharge Mr. Cuomo has proposed.

“You cannot be afraid of this governor. The governor is one man!” said Jamell Henderson, an organizer with the activist group New York Communities for Change, which supports tax hikes. “If he’s trying to stop the progress, then you all and we the people come together to collectively make the change.”

Mr. Cuomo said last week that raising taxes shouldn’t be “a political statement,” and Cuomo’s senior adviser Rich Azzopardi called Mr. Henderson’s statement deranged. Just over half of New York’s income taxes are generated by the highest-earning 2% of filers, and Mr. Cuomo and state Budget Director Robert Mujica said they are afraid higher rates will prompt the wealthy to leave. Tax advocates say this fear is overblown.

After the budget was introduced Tuesday, Mr. Mujica said: “Some in the Legislature take the position that you shouldn’t do any spending cuts unless you do a tax increase. So, this is an attempt to deal with that, and to start a dialogue about it.”

The governor has spent months postponing the conversation on raising taxes, and instead smoothed out the state’s cash flow by holding back payments to municipalities, social-service providers and school districts as well as postponing raises for public employees.

Reframing the tax debate with federal funding allows Mr. Cuomo to channel the ire of groups seeking more government spending from Albany to Washington. He can also disclaim responsibility if taxes eventually do rise.

Andrew Rein, president of the Citizens Budget Commission, a nonpartisan watchdog, said Mr. Cuomo could have plugged his budget hole without increasing taxes by, for example, reducing economic-development spending and trimming state aid to wealthy school districts.

Mr. Cuomo is counting on $1.5 billion from the tax increase to help bridge the $10.2 billion deficit in the coming fiscal year; a combination of spending reductions, better-than-expected tax receipts and federal aid filled the $4.7 billion gap for the current fiscal year.

E.J. McMahon, research director of the Empire Center for Public Policy, a fiscally conservative think tank, agreed that Mr. Cuomo could address the deficit without raising taxes. Mr. McMahon said putting a tax increase on the table increased the likelihood of its adoption.

“The Legislature is itching to do this tax increase,” he said. “They can barely contain themselves. So, if you put it there, they will grab on and cling to it.”

Read the full story here at the Wall Street Journal.