State lawmakers want to raise taxes on the wealthy and corporations by $7 billion to stop tuition increases, fund transportation and rent assistance, and provide aid to undocumented New Yorkers who were left out of the federal and state pandemic relief efforts.
The proposals from the State Assembly and the State Senate call for significant spending increases compared to the budget proposed by Governor Andrew Cuomo in January—more than 10%, or $8.7 billion in the Assembly.
Cuomo’s budget had called for a modest tax increase on New Yorkers earning more than $5 million a year—and only if the state didn’t get enough federal aid. New York will get $12.6 billion in direct state aid from the federal relief act passed last week, lower than the $15 billion Cuomo had been asking for, but enough to stabilize what was a very shaky long-term budget picture.
The legislature is proposing slightly higher taxes on millionaires, and creating two new tax brackets: a 10.85% tax rate for people making between $5 million and $25 million annually, and an 11.85% rate for those who earned $25 million or more. These new taxes would raise $4.3 billion annually, according to the Assembly.
Additional taxes proposed by the legislature include a 1% capital gains “surcharge,” a tax targeting “owners of high value second homes” (a version of the pied-a-terre tax that has been kicking around Albany for years), higher corporate tax rates and a 4% hike on the top estate tax rate; these proposals among others would generate around $3 billion.
“We are receiving significant federal funding, but we must also ask those who can do more to step up and help,” Assembly Speaker Carl Heastie said in a statement. “The COVID-19 pandemic impacted every aspect of our lives, and we need to make investments that will aid in our state’s recovery, while ensuring that New Yorkers continue to have access to the vital services they need.”
The legislature rejected the proposed tuition increases at CUNY and SUNY, and directs hundreds of millions of dollars in assistance and capital aid their way. The budget also stops the governor’s $145 million “raid” of MTA funds, and creates a rent relief fund of more than $3 billion.
Another fund of $2.1 billion would go towards providing relief money to undocumented New Yorkers and those left out from state and federal pandemic assistance over the last year.
Nadia Marin-Molina, the co-executive director of the National Day Laborer Organizing Network, pointed out that hundreds of thousands of undocumented workers across the state contributed to a state unemployment fund through their payroll taxes that they could then not access once the pandemic hit.
“People who are hardest hit but have been protesting, calling legislators, building allies, I think it’s really important to see how excluded workers have been able to push to make sure that their humanity is recognized in New York,” Marin-Molina said.
Still, her group and others are asking the state legislature to increase the amount in the fund to $3.5 billion, so that the workers could receive the same amount of benefits as their fellow New Yorkers.
“There is still the need to tax the rich,” she said. “Originally, this particular fund was paired with one of the proposals to tax the rich, to tax billionaires, and billionaires have still been profiting during the pandemic.”
Despite the unusual amount of leverage the state legislature has this year—a Democratic supermajority, many of whom have called for the resignation of Governor Cuomo for his handling of nursing home deaths during the pandemic and mounting sexual misconduct allegations—they did not include the bolder bills pitched by the Invest In Our New York coalition to raise $50 billion. The six bills in that package include a wealth tax on billionaires, a stock transfer tax, and a significantly higher capital gains tax rate.
“It doesn’t feel like leadership really met this moment in the way they could have,” said Rebecca Bailin, the group’s campaign manager. “Our legislature has the opportunity to turn back the clock on Governor Cuomo’s austerity budgets.”
A spokesperson for the governor’s budget office, Freeman Klopott, said they were reviewing the one-house bills.
“The federal funding is a one-shot resource and is not recurring, and we will work with the legislature to identify the best solutions to close the current and out-year budget gaps as we negotiate the budget ahead of the April 1 deadline,” Klopott said in a statement.
Despite the legislature’s abandonment of the most controversial tax proposals, conservative tax analysts and a pro-business group told the NY Post they were worried that if these tax hikes were enacted, wealthy New Yorkers would leave. “If these revenue raisers are approved in the final budget, it will be very difficult to attract or retain the talent and private investment that we need for a healthy recovery,” Kathryn Wylde, the CEO of the Partnership for New York, told the paper.
But there is little research to suggest that higher taxes cause an exodus of the wealthy, as we have previously reported. New York has one of the highest tax rates in the country, and also a staggering number of billionaires. One Stanford University study from 2016 suggested that millionaires are actually less mobile than lower income taxpayers and aren’t exactly inclined to move their businesses and families to zero income tax states like Florida.
“The main problem with moving to Florida is that you have to live in Florida,” one fund manager recently told Bloomberg News, in a story about how financiers who moved to the Sunshine State during the pandemic are eager to return to New York City.