New York State coffers swell and benefit from Covid-19 recovery
A better-than-expected economic recovery and a massive influx of federal aid have inflated New York State’s once-empty coffers, a reversal of fortune that has some tax watchdogs questioning the state’s decision more early this year to raise income taxes on high incomes. employees.
Governor Andrew Cuomo and the Democrats who control the state Assembly and Senate approved a $ 212 billion budget in April that included $ 4.3 billion in new annualized revenue from increased taxes on personal income and business franchises. The state also received $ 30 billion from the US federal bailout law approved in March, including $ 12.7 billion in general aid that lawmakers plan to use over the next four fiscal years.
In late May, Mr. Cuomo’s budget office released a financial plan that increased state income tax projections by $ 4.1 billion from original January estimates, a revision that excluded the effect of the new higher tax rates and reflected better economic forecasts.
And last week, Controller Tom DiNapoli released a monthly treasury report that found actual state revenue to be about $ 4 billion ahead of those more bullish projections due to robust sales and perceptions. income taxes.
“It’s just amazing,” said EJ McMahon, research director for the Empire Center, a fiscally conservative think tank. “I imagine the governor’s budget office like a drug trafficker’s kitchen, with bricks of $ 100 bills hidden in the microwave, under the sink, in the back of the freezer.
McMahon and Andrew Rein, chairman of the non-partisan watchdog Citizens Budget Commission, said earlier this year that federal aid avoided the need to increase income taxes. Mr Rein said in an interview last week that the governor’s tax assistants had enough information in March to know the economic situation would lead to better collections of income taxes, which are the biggest source of income tax. state revenues.
Mr Rein said he was stunned when he saw the updated financial plan in May.
“Do we really need the money? No. Would we be more competitive if we shortened or reduced some of this tax increase? Certainly, ”he said.
The Democratic governor has proposed the first income tax increase of his three terms this year, saying Covid-19 has hit the economy. Mr Cuomo has opposed the tax hike for years, saying he was concerned that increases would entice wealthy New Yorkers to migrate to other states. The governor initially suggested that a strong federal package would remove the need to raise taxes.
But as he faced multiple inquiries and calls for his resignation, he accepted lawmakers’ demands for a multi-year increase in funding for the “foundation aid” of public schools as well as an increase in income tax to pay it.
“The state plans to invest long-term income in communities that were suffering long before Covid,” said Michael Kink, executive director of Strong Economy for All, a coalition of unions that supported the tax hike. “I think lawmakers recognized this session that tax policy was not about a short-term crisis, but about long-term investments for a broader, stronger recovery that includes tackling racial equity squarely and directly. “
The governor’s budget manager Robert Mujica said Mr. Cuomo’s position was consistent. He said the administration would now redouble its efforts to ensure that state funding is distributed fairly among schools, now that “the issue of income is no longer on the agenda.”
MM. Mujica and DiNapoli have said in interviews it is too early to tell if last week’s cash report was anything more than a temporary bump. They said it could take additional months before the full effects of remote working and potential taxpayer migration show up in state receipts.
Mr DiNapoli urged his former colleagues in the state legislature to use any extra money to increase their reserves. But 2022 is an election year for the governor and the 213 state legislators, so the temptation to add initiatives that appeal to certain political segments will be strong.
“We have seen it in the budget process this year,” said the Democratic comptroller. “They said, ‘You know what? We want to spend this money and more. It is their prerogative.
THE QUESTION: Who was the only New York State comptroller to become president?
– Know the answer? Write me an e-mail!
LAST RESPONSE: Former New York Governor Mario Cuomo was the only other governor to appoint all seven members of the state’s Court of Appeals
Write to Jimmy Vielkind at [email protected]
Copyright © 2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8