Conceptual Agreement Reached On State Budget, But Some Sticking Points Remain

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ALBANY, NY (WSKG) – Five days into the new fiscal year, Gov. Andrew Cuomo and legislative leaders say they have a “conceptual agreement” on a new state budget.

If the deal holds, it would include $4 billion in new taxes, including higher income tax brackets on millionaires and a tax increase for some large
corporations.

Gov. Andrew Cuomo (Mike Groll/Office of Governor of Andrew M. Cuomo via AP)

If the budget agreement is approved, New Yorkers who make more than $1 million a year would see their taxes increased by nearly one percentage point.

Two new higher tax brackets would be added for those with annual incomes over $5 million and over $25 million. It would make New York’s combined state and local taxes on the wealthy the highest in the nation.

Leaders of the state legislature had been pressing for an even larger tax package that would total $7 billion.

Cuomo wanted a significantly smaller package. He argued that that raising taxes too much on the rich would cause them to leave the state. At a briefing, Cuomo did not comment specifically on the tax plan. But he praised the arrangement
overall, saying it will help the state recover from the economic losses during the COVID-19 pandemic.

“This budget will set the trajectory for the state for the next 10 years,” Cuomo said.

Cuomo and lawmakers also tentatively agreed to increase the corporate franchise tax. The state’s business council, which lobbies for business interests, say the additional taxes might end up harming the very people that advocates for higher taxes hope to help.

The business council’s Ken Pokalsky said the current state corporate tax rate of 6.5 percent is the 21st-highest in the nation. He said the plan to temporarily raise that rate to 7.25 percent places the state in the top 10 states for high business taxes.

“It’s going to make it more expensive to do business here,” Pokalsky said.

The tax does not affect unincorporated businesses like LLCs, which are the bulk of the state’s companies. But Pokalsky said the corporations, which include large chain stores and manufacturing companies, provide the majority of private-sector jobs in the state. And he said not all of them have
done well during the pandemic.

Pokalsky said the timing of the tax increases is unusual at a time when the state and local governments are receiving a multibillion-dollar infusion of federal stimulus cash that closes most of the state’s deficit.

“We’ve never seen a good justification of why the state needed to raise any additional taxes, given the substantial federal assistance to the state,” Pokalsky said.

The new taxes would help pay for at least $1.4 billion in additional school aid. Many Democrats and education groups sought a $4 billion increase to fulfill a 15-year-old court order that said the state needed to pump more money into New York’s poorest schools.

Andy Pallotta, President of the New York State United Teachers union, said in a statement that even with the temporary federal stimulus funds, some of which go directly to schools, more funding is needed in the long term.

He said talks with lawmakers are continuing. Other final sticking points include how to structure expanded mobile sports gambling and the potential
siting of three new casinos in the downstate area.

A $2 billion fund to provide retroactive unemployment benefits to undocumented workers who lost their jobs in the pandemic also isn’t finalized. Dozens of the excluded workers, including some who have been on a hunger strike, demonstrated in a hallway in the state’s capitol complex.

Over the weekend, four more budget bills were introduced, including continued funding for the legislature and the judiciary branch of government, as well as allocations for health care, transportation and the environment.

Lawmakers hoped to begin voting on them as early as Tuesday, leaving the unresolved issues to a final piece of legislation at the end.

State Comptroller Tom DiNapoli has warned that if the final spending plan is not in place by the end of Tuesday, then paychecks for 39,000 state employees, including many front-line essential workers, will be delayed.