ALBANY (WSKG) – Gov. Andrew Cuomo delivers his State of the State address on Wednesday, kicking off a challenging year of budget deficits and re-election races.
Cuomo begins his eighth year in office facing the largest budget deficit since 2011. New York is short $4.4 billion, and there’s uncertainty over federal policies, including the overhaul of the tax code, that could leave the state with even a bigger budget hole in the future.
The governor fought unsuccessfully to reverse the elimination of the deduction for state and local taxes, which harms some middle-class and wealthy taxpayers in the state. Cuomo, speaking on CNN over the holidays, said he’ll announce in his State of the State a plan to re-engineer the state’s tax code to try to mitigate the effects.
“We’re going to propose a restructuring of our tax code, “Cuomo said on the CNN program New Day. “I’m not even sure what they did is legal or constitutional and that’s something we’re looking at now.”
Cuomo said his legal experts are looking into whether the state can file a lawsuit against what he said is double taxation.
New York, New Jersey and California are among states considering back-door ways to restore the deductions. One proposal would convert state income taxes to a payroll tax on employers, which is still deductible. Another would reclassify state income taxes as charitable contributions to state government, allowing taxpayers to then claim the payments as deductions on their federal income taxes.
Ron Deutsch with Fiscal Policy Institute, a union-affiliated economic think tank, said the ideas do seem a bit far-fetched, but he said states with higher local taxes may have to get “creative” to prevent being harmed by the new tax changes.
“I don’t think there are any crazy ideas at this point,” Deutsch said. “There are just ideas that need to be trotted out and tested.”
Deutsch said New York already pays $48 billion more to the federal government each year than it gets back.
The state’s Conservative Party offered another solution to make up for the loss of the state and local tax deductions, saying in a statement that New York, a relatively high-tax state, should simply spend less money and work to lower taxes.
Cuomo has released several proposals in advance of his Wednesday speech, including changing how the state responds to allegations of sexual harassment.
His proposal, released Tuesday, would end nondisclosure agreements for victims, and no longer require state taxpayers to fund payouts after a lawmaker or state official settles a sexual harassment case. Those accused would have to make the payments themselves. Private companies that hold contracts with the state also would be required to disclose any cases of sexual assault or harassment that occurred in their businesses.
Libby Post, co-founder of the women’s rights group CapitalWomen, applauded the proposals.
“This is an incredible step forward for women,” Post said. “To have a more cooperative workplace and a safer workplace.”
It’s believed New York has paid several hundred thousand dollars in sexual harassment settlements in recent years.
The governor recently let go a top economic development official, Sam Hoyt, after Hoyt personally paid a woman $50,000 after she accused him of harassing her. Hoyt has not admitted any wrongdoing.
2018 is an election year for statewide offices, and Cuomo has said he’s interested in seeking a third term, though he has not yet formally announced his candidacy. The governor so far has no official Democratic primary opponent, but several Republicans have said they may challenge him.
Before the November elections, several of the governor’s former associates, including a former top aide, go on trial for corruption. Cuomo has not been accused of any wrongdoing.
The governor also is considered a potential Democratic candidate for president in 2020, though Cuomo has not said he’s interested in running. But many in the political world will view his speech as a possible prelude to a national race.