Gov. Andrew Cuomo on Tuesday proposed a radical change in the state income tax code, shifting it to an employer-paid payroll tax to offset the national tax changes that limit people’s ability to deduct their state and local taxes on their federal return.
In about a 40 minute-long budget address, Cuomo said this is going to be the toughest budget in recent memory. The state is facing a $4.4 billion gap in revenues; $2 billion in Medicaid cuts; and an increased tax burden on residents, because of federal tax code changes that capped the deduction at $10,000.
“This is the fight of New York’s future, and we’re going to get there and we’re going to get there together,” he said.
Cuomo is also proposing to collect another $1 billion in what he called “revenue-raisers.” The governor is proposing a fee on health insurance providers to recoup some of the windfall he said they received in the corporate rate tax reduction; and a tax on nonprofit health care providers that convert to for-profit corporations.
Cuomo said the changes are necessary to combat what he called an “economic missile” that was launched from Washington at the state of New York.
“You want to shoot at our tax code the way it was. We change the tax code,” he said.
Cuomo pointed out that New York sends $48 billion more in revenues to the federal government than it receives back. He said New York and California are being used as piggy banks to fund the federal tax plan.
Cuomo said the federal government’s logic does not make sense. New York is accused of being a high tax state, so the Trump administration implements a plan that would raise the state’s taxes even more.
“It will devastate people on fixed incomes. It will devastate seniors and it will devastate our economic competitiveness,” he said.
Cuomo said the state has held the line on spending, avoiding the 7 to 10 percent increases seen in the late 1990s and 2000s. Property taxes have been high, but increases are capped at 2 percent. He said the average property tax increase in other states is around 3.7 percent.
Cuomo is limiting growth in spending to 2 percent in most areas of the $168 billion budget proposal. He acknowledged everyone is going to say: “I want more.”
“It’s a question of balancing resources,” he said.
Local representatives reacted to some of Cuomo’s ideas, particularly the payroll tax.
“It would be pretty complicated, that’s for sure,” said Sen. Elizabeth Little, R-Queensbury.
“If you had $100,000 and you had a $5,000 New York state tax, you would only get $95,000 and your employer would pay that $5,000 directly to the state for you. And he would take that as a deduction,” she said.
Little said she supports continuing to control spending and making the property tax cap permanent, because it has helped keep taxes down. In the past, taxes rose quickly, she said.
“If it was only 7 or 8 percent, you’d breathe a sigh of relief,” she said.
Property taxes are a concern because the state has a lot of second homeowners, she said.
Uncertainty is the order of the day, according to Little.
“I came away thinking — there’s just a lot of unknowns on how this is going to play out,” she said.
Assemblyman Dan Stec, R-Queensbury, said he wanted to hear a plan from the governor for addressing spending.
“Just like the governor’s State of the State, his budget presentation was a mixed bag. Although I am happy to see continued investment around the state, we must be cognitive that we are facing a possible $4.4 billion deficit,” he said in a statement. “We need to be mindful of unnecessary spending this year and focus on balancing our budget and making New York more affordable for middle-class families. Our state has continuously ranked among the worst states in the country when it comes to property taxes, this needs to change.”
Cuomo also proposed having the Health Department conduct a study on the health, economic and criminal justice effects of marijuana legalization.
He wants a surcharge of 2 cents per milligram on the active ingredient in opioids and to use the funding for addiction treatment. He wants to provide another $26 million for addiction services.
The Alcoholism and Substance Abuse Providers said it likes that proposal, calling it a “creative and novel approach to fund prevention, treatment and recovery.”
“New York state must provide dedicated and consistent workforce funding if we are going to begin reversing the tragic upward trajectory of opioid addiction and overdose deaths,” said Executive Director John Coppola in a news release.
The state should adopt a set of uniform sexual harassment policies, Cuomo said.
“I think New York should take the lead. This is a national crisis, a national issue,” he said.
He also proposed an education campaign to increase the use of E-Z Pass upstate, $29 billion in funding for roads and bridges and $65 million to address the problem of algal blooms in lakes.
That money pleased Eric Siy, executive director of the Fund for Lake George, who said the lake is facing the dual threat of pollution from wastewater and stormwater runoff.
“This funding will allow us to curb those negative impacts and protect the lake in the process,” he said.
The lake is the lifeblood of the region’s economy, according to Siy.
“This really is an investment in the future of our economy and our environment, not just Lake George, but statewide,” he said.
The taxpayer advocacy group Unshackle Upstate criticized the proposed $1 billion in tax increases, calling it “irresponsible and ill-advised” and the wrong message to send to taxpayers and employers. Instead, the group said the state should reduce spending.
“This reckless tax-and-spend proposal will not protect taxpayers, but push them over the edge in search of more prosperous economic climates,” Unshackle Upstate Executive Director Greg Biryla in a news release. “A million New Yorkers have fled to other states in the last decade due to New York’s massive spending habit and overwhelming tax burden. The state simply can’t afford for this trend to continue.”